By JACK KASKEY
The race to control the worlds biggest source of
lithium used in everything from iPad batteries to electric
cars and everyday drugs is on.
Albemarle Corp. agreed Tuesday to pay $6.2 billion in cash
and stock for Princeton, New Jersey-based Rockwood Holdings,
the largest lithium producer.
Rockwood is one of four companies that control about 90% of
the market for lithium. Demand for the metal will expand as
much as three times faster than the overall economy, Baton
Rogue, Louisiana-based Albemarle said in an investor
Growth in lithium will come from the continued
proliferation of electronic devices as well as energy
storage, with the prospects for battery growth within the
automotive industry especially attractive, Albemarle
CEO Luke Kissam told analysts on a conference call. We
are going to see an inflection point in lithium.
Other lithium producers are just as bullish. The world market
may double in a decade with demand growing at 7% to 10%
annually, Chiles Soc. Quimica & Minera de Chile
said in April.
Tesla Motor Inc. the carmaker led by Elon Musk, plans a
battery gigafactory that may consume as much as
17% of current lithium output, Goldman Sachs said in
February. Tesla said in March that the $5 billion plant will
only use only raw materials sourced in North America.
The Albemarle deal is the latest example of consolidation in
the highly concentrated lithium industry. In 2012,
Chinas Chengdu Tianqi Industry Group agreed to buy
Australias Talison Lithium, owner of the worlds
largest open-pit lithium mine. Chengdu later agreed to sell a
stake in the mine to Rockwood, which had unsuccessfully bid
Talison, Rockwood, Philadelphia-based FMC Corp. and SQM
control about 90% of worldwide lithium production, according
to Jefferies & Co.
Albemarle agreed to pay $50.65 in cash and 0.4803 of a share
for each Rockwood share. That values Rockwood at
$85.53/share, or 13% more than Mondays closing price,
the companies said in a statement.
Bank of America Merrill Lynch is providing financing for the
cash portion of the deal, which is expected to close in the
first quarter of 2015.
Albemarle investors will own 70% of the combined company and
Rockwood holders the rest. Albemarles Kissam will be
Albemarle said the deal isnt contingent on the
completion of Huntsmans planned acquisition of
Rockwoods titanium-dioxide (TiO2) business.
Tuesday's deal is the largest takeover of a diversified
chemicals company since Solvay bought Rhodia in 2011,
according to data compiled by Bloomberg. It will add
to Albemarles cash earnings per share in the first
year, according to the statement. Albemarle expects about
$100 million in cost savings by 2016.