Allkem and Livent plan merger to form major lithium player

In a deal that would create a major new player in the lithium chemical industry, Allkem and Livent plan to merge in an all-stock transaction that values the combined company at $10.6 billion.

Allkem and Livent currently produce a combined 60,000 metric tons (t) of lithium chemicals per year and aim to increase output to 248,000 t by 2027, which would make the merged company the third-largest lithium producer in the world, after Albemarle and SQM. In 2022, the companies had combined sales of $1.9 billion.

The two firms both have lithium mining projects in Argentina and Canada that are close to each other. Merging will allow them to share infrastructure and resources, they say, making their operations more efficient and moving projects forward faster. Allkem is also active in Australia.

If the deal goes through, Livent CEO Paul Graves will lead the as-yet-unnamed company, and the headquarters will be in North America, where Livent is based. Shareholders of Allkem, based in Argentina, would end up with 56% of the new company. The companies expect to close the deal by the end of the year.

On a May 10 call with investors, Graves argued that the size of the new organization will give customers faith that it can deliver the lithium needed for building electric vehicle batteries. He also said the new company’s diversity of products, which include lithium hydroxide, lithium carbonate, and lithium metal, will make it easier to give customers the chemicals they need. “You’re not relevant if you’re selling them 5,000 tons per year of [lithium] hydroxide. You need to provide them more,” he said.

Cameron Perks, principal lithium analyst at Benchmark Mineral Intelligence, agrees that the scale of the new company should give it more power during negotiations with customers. “They could provide a larger volume . . . a larger base of supply, thereby giving confidence to the buyer,” he says.

Perks adds that combining Allkem’s and Livent’s mining and lithium conversion projects in North America will make it easier to sell to battery materials makers in the region, which are eager to buy North American goods that qualify for incentives under the US Inflation Reduction Act.

The planned merger continues dealmaking activity in the industry. In March, Albemarle offered to buy the Australian lithium miner Liontown Resources for $3.7 billion, though Liontown’s board rejected the offer. The shareholders of Essential Metals, which has a lithium project in Australia, turned down a $92 million bid from Tianqi Lithium in April. And in late 2022, Lithium Americas agreed to pay $227 million for Arena Minerals, which is developing a lithium mine in Argentina. Allkem itself was created in 2021 when Orocobre paid $1.4 billion to acquire Galaxy Resources.

Howard Klein, a partner at the lithium advisory firm RK Equity, expects that more deals are coming, driven largely by the needs of battery makers looking for lithium to meet growing demand for electric cars. “Albemarle and Livent are looking internally and saying, ‘We don’t have enough. We need to make investments,’ ” he says.