Following speculation on October 5th that Rio Tinto (NYSE:RIO) was considering acquisition of two lithium producers; Albemarle (NYSE:ALB) and Arcadium Lithium (NYSE:ALTM), Arcadium Lithium confirmed receiving a non-binding approach from Rio Tinto on October 6th. However, as PRNewswire conveyed, Arcadium emphasized that there are no further official comments until there is news to share.

A non-binding approach has no certainty that any transaction will be agreed upon or proceed. Arcadium reaffirmed its strategic pathway they delivered in September 2024, and has provided contact information for inquiries from investors and media but no information regarding the possibility of acquisition by Rio Tinto.

Here are some factors to consider

• Volatility: If the acquisition goes through, it could bring a positive reaction and significantly increase the value of Arcadian stock price. The news of potential acquisition has been well-received by the market. And as investors react to the news of potential acquisition, the stock price shall be volatile and may not be fit for all investors

• Growth benefits for both parties: If the acquisition materialized, Rio Tinto as a global mining giant could bring additional resources, expertise and more involvement to Arcadium. Arcadium is a large lithium producer that is well-positioned to capitalize the growing demand for lithium that is important in electric vehicle batteries.

• Uncertainty: A non-binding approach, just like its name, has no guarantee that the approach shall develop to a real deal and along the way Rio Tinto may decide not to proceed.

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This article first appeared on GuruFocus.