Queensland company swallows rival to create $4b lithium producer
Brisbane-based Orocobre will buy all the shares in Perth’s $1.8 billion Galaxy Resources to become a top-five global lithium producer with a market value of $4 billion.
Orocobre's Argentina lithium carbonate project
The two companies will merge under a scheme of arrangement in which Galaxy shareholders will receive .569 Orocobre shares for each Galaxy share held. Orocobre shareholders will own 54 per cent of the merged company, which does not yet have a name.
The deal has been backed by the boards of both companies.
Orocobre owns a brine-based lithium carbonate facility in Argentina and last week said prices for its product would jump from $US5853 a tonne to $US7400 in the June quarter.
Galaxy owns projects in Canada, Argentina and Western Australia. Galaxy’s chairman Martin Rowley would chair the new company.
Orocobre chair Robert Hubbard said the logic of the merger was compelling.
“Both Orocobre and Galaxy will benefit from the diversification, growth and scale of a top five lithium chemicals company,” Hubbard said.
Orocobre chief executive Martin Perez de Solay said the merger would bring together the assets and teams with highly complementary skills and knowledge and it would be a unique opportunity to create a leading lithium company.
“The merger consolidates the combined group’s position in Argentina and will give us operational, technical and financial flexibility to deliver the full value if our combined portfolio,” he said.
The merger would also lift the new company into the ASX 200 and increase liquidity and its capital markets profile.
Orocobre said the new company would also have a balance sheet with gross cash of $US487 million and would be well-placed to deliver a world class project pipeline.
The companies also said the merger would deliver expertise that would de-risk the Sal de Vida project and leverage the skills from Orocobre’s Olaroz project.
The deal will need Galaxy shareholder and court approval. An independent expert would also need to conclude that the deal was in the best interests of Galaxy shareholders.
Orocobre also announced today that its Olaroz sales price had lifted more than 50 per cent in the March quarter and production was at a record level.
Orocobre shares were up 4 per cent to $6.45 this morning. Galaxy shares rose .8 per cent to $3.64.
Under the deal, the head office of the merged company would be in Argentina while its corporate headquarters would be retained on the east coast of Australia. Perth would also keep an office.
