Rio Tinto and Arcadium Lithium shares rise on takeover talks
Make us a preferred source
Make us a preferred source on Google
The news: Shares in Rio Tinto and Arcadium Lithium both gained at market open after Rio confirmed it has approached the lithium producer for a potential acquisition on Monday.
The numbers: Rio shares were up 1.2% to $122.64 by 10:40am AEDT. Arcadium was up 1.2% to $6.16.
On Monday, Arcadium rocketed 46.89% while Rio fell 0.71%.
The context: Morgan Stanley analysts said a potential acquisition of Arcadium would "slightly accelerate" Rio's portfolio mix shift towards future-facing commodities and provide scale to growth its lithium business in the long term. However, accretion would depend on valuation, lithium price tailwinds, and "a timely delivery of growth plans", they said.
RBC Capital Markets analysts see "significant alignment" on the direction in which Rio wants to take its lithium business and Arcadium's asset base, technology and growth. They noted that the companies' assets match geographically, with Rio and Arcadium both holding operations in Argentina and Canada. RBC hiked its price target on Arcadium by 30% to $6.10, incorporating a "takeover/control premium".
Citi analysts said that aside from value accretion, Arcadium could deliver Rio lithium scale, first-quartile costs in familiar jurisdictions, and exposure to minerals supply chains critical to the US Inflation Reduction Act. They noted that Arcadium is unlikely to re-rate in the short term, aside from an acquisition, particularly amid weak lithium sentiment.
The sources: RBC Capital Markets research, Morgan Stanley research, Citi research
