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(Reuters) -Lithium companies Allkem Ltd and Livent Corp said on Wednesday they will combine in an all-stock $10.6 billion deal to create the world's third-largest producer of the metal used to make electric vehicle batteries.
Shares of Livent were up about 5.4% to $25.53 in late morning trading on the New York Stock Exchange. Allkem's shares closed up nearly 1% on the Sydney Stock Exchange.
Combining U.S.-based Livent and Australia-based Allkem creates an industry powerhouse on four continents that executives hope will bring more heft and skills needed to boost supply of the metal to an increasingly hungry automotive sector, including Tesla Inc, General Motors Co and BMW.
"To develop more lithium projects, you need to be big enough to finance, you need access to resources and you need technical expertise," Livent CEO Paul Graves said in an interview. "Combining the two companies helps us with all of those areas."
Allkem and Livent operate lithium brine facilities in Argentina that are roughly 10 km (6.2 miles) apart, and in the Canadian province of Quebec they are both building hard rock lithium mines less than 100 km (62 miles) apart. Combining the companies should help those projects develop faster, Graves said.
Allkem also produces hard rock lithium in Australia, has a chemical conversion facility in Japan, and is an expert in the nascent field of direct lithium extraction (DLE), which is increasingly seen as a tantalizing prospect to produce more of the battery metal faster than traditional mining methods.
"We need all of these skills," Graves said, adding that the increased size will help the new company self-finance operations. "Together we have broader capabilities."
ARGENTINA FOCUS
Under the deal, which is set to close by the end of 2023, Allkem shareholders will get one share in the combined entity for each of their shares and the company will ultimately own 56% of the new firm. Livent shareholders will get 2.406 shares in the new firm for each existing share.
Graves will be CEO of the new company, while Allkem's Peter Coleman will be its chairman. The company, which has yet to be named, will be listed on the NYSE and headquartered somewhere in the United States.
Allkem CEO Martin Perez de Solay will become an advisor to the new company.
Analysts said the new company's combination of mining and processing assets across the globe are strong growth harbingers. "It will be one of the largest and most resilient lithium producers globally by the end of the decade," said Jordan Roberts of Fastmarkets, a consultancy.