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Albemarle to merge with US specialty chemicals, lithium firm Rockwood

07.15.2014  | 

Albemarle Corp. agreed Tuesday to pay $6.2 billion in cash and stock for Princeton, New Jersey-based Rockwood Holdings, the largest lithium producer, in the industry’s biggest deal to date



The race to control the world’s 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 presentation.

“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, Chile’s 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, China’s Chengdu Tianqi Industry Group agreed to buy Australia’s Talison Lithium, owner of the world’s largest open-pit lithium mine. Chengdu later agreed to sell a stake in the mine to Rockwood, which had unsuccessfully bid for Talison.

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 Monday’s 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. Albemarle’s Kissam will be CEO.

Albemarle said the deal isn’t contingent on the completion of Huntsman’s planned acquisition of Rockwood’s 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 Albemarle’s cash earnings per share in the first year, according to the statement. Albemarle expects about $100 million in cost savings by 2016.

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