Albemarle Withdraws Bid for Liontown Resources

After seven months, several bids, and involvement from a privately held mining player, Albemarle’s attempt to acquire Liontown Resources has come to an end. The situation became too complicated to proceed further.

Albemarle (ticker: ALB) and Liontown (LTR.Australia) shares are reacting in opposite ways on Monday following this announcement.

On Sunday, lithium giant Albemarle revealed that it has withdrawn its proposal to acquire Liontown for 3 Australian dollars per share. Albemarle initially made a hostile bid in March, offering A$2.50 per share after two previous bids were rejected by Liontown. Eventually, the A$3 bid convinced Liontown to enter into negotiations. However, a few days ago, privately held Australian iron-ore miner Hancock Prospecting disclosed that it had acquired a 19.9% stake in Liontown.

Hancock Prospecting has not provided any comment regarding its plans for this stake.

Kent Masters, CEO of Albemarle, acknowledged the significant efforts made by both teams. He stated, “Our engagement with the Liontown team has been meaningful and productive. We appreciate the level of cooperation we have received, and we thank the entire team for their efforts.” The complexity of the situation was cited as one of the reasons the deal did not progress.

In premarket trading, Albemarle stock rose 1.1% to $165.19 per share, while S&P 500 and Dow Jones Industrial Average futures increased by 0.2% and 0.3%, respectively. Conversely, Liontown shares declined by 2.8% to A$2.79 per share.

Liontown Shares Slide After Albemarle’s Bid

Liontown shares experienced a decline after news of Albemarle’s bidding came to light. The shares are expected to slide back towards the A$1.50 level. Citi analyst Kate McCutcheon, in a Sunday report, reduced the target price per share by 70 cents to A$2.30 and advised selling based on valuation concerns. McCutcheon does not anticipate Hancock purchasing the entire company and expresses some reservations about project timelines.

Liontown’s Mining Projects in Western Australia

Liontown currently has two mining projects under development in Western Australia. The production of lithium products suitable for refining into battery-grade materials is expected to commence around 2024.

Albemarle’s Offer for Liontown

Albemarle had proposed payment of approximately A$6.2 billion, or $4.2 billion, for the Liontown projects had the A$3 bid been accepted.

Relief Among Albemarle Investors

Investors of Albemarle appear relieved that the company’s bid for Liontown has come to an end. Albemarle stock has experienced a decline of about 25% since early March when the hostile bid was disclosed, closely reflecting the dip in benchmark lithium prices, which have diminished by approximately 50% to around $23,000 per metric ton.

Long-Term Lithium Demand

With the increasing sales of electric vehicles worldwide, the demand for lithium is anticipated to grow in the long term. However, shares of lithium producers tend to be more volatile in shorter time frames when commodity prices fluctuate.