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$3.7 Billion Offer for Tesla Supplier Jolts Lithium Stocks -- WSJ
Today 10:00 AM ET (Dow Jones)Print
By Stephen Wilmot


Investors have a new reason to like Australian lithium stocks: takeover action.

The Sydney-listed shares of Liontown Resources, which is working on a big lithium-ore prospect in Western Australia, jumped 69% on Tuesday after U.S. lithium producer Albemarle said it made a $3.7 billion preliminary offer to acquire the company and received a rejection. The stock of Liontown's bigger peer Pilbara Minerals rose 12%.

The moves buck the recent trend. Most lithium stocks have fallen since their November peaks as prices for the metal in China have weakened (https://www.wsj.com/articles/battery-metal-prices-fall-back-to-earth-fd6f04cb). The country's red-hot electric-vehicle market, a key consumer of lithium compounds, has cooled following the expiration of Beijing's purchase subsidies at the end of last year.

Liontown says the turn in sentiment is a reason for Albemarle's interest. In a statement the target company noted the "opportunistic timing" and said the bid "substantially undervalues" it. It sounds like Liontown isn't shutting the door completely on Albemarle, which already made two previous offers.

Liontown's key asset is a site called Kathleen Valley, which is due to start producing lithium in 2024. Tesla, Ford and GM's battery partner LG Energy signed supply agreements with the company last year that cover the vast majority of its initial supplies. As a U.S. free-trade partner devoid of geopolitical drama, Australia is an ideal lithium source for the booming EV industry (https://www.wsj.com/articles/the-world-needs-more-lithium-and-pilbara-can-help-11660820224) in the U.S.

Liontown's shares closed about 3% above the latest offer price. With a market value of about $26 billion and net debt of only $1.6 billion, Albemarle can afford to bid a bit more if it wants to. The deal drama is likely just getting started.

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