The World's #1 Renewable Energy Network for News, Information, and Companies.

Largest Lithium Resource Deal Spurred by Battery Demand for Electric Vehicles

Largest Lithium Resource Deal Spurred by Battery Demand for Electric Vehicles

Surging demand for high-performance batteries triggered the largest-ever deal for lithium, the lightweight metal that’s a key component of the power systems in smartphones and electric cars.

Albemarle Corp. agreed yesterday to pay $6.2 billion in cash and stock for Princeton, New Jersey-based Rockwood Holdings Inc., the biggest producer of lithium.

Consumption of lithium doubled in the decade through 2012, and is growing even faster now. Albemarle expects demand to increase as much as three times faster than the global economy, with consumers demanding more mobile devices and electric vehicles becoming more common.

“The growth of lithium, if you look at the proliferation of electronic materials, it’s powered by the lithium-ion battery,” Albemarle Chief Executive Officer Luke Kissam said in an interview. “And certainly automotive will be a big growth opportunity.” He expects a sharp increase in demand starting in about 2017.

Rockwood is the largest of four companies that control about 90 percent of the market for lithium, and they’re all bullish. Chile’s Soc. Quimica & Minera de Chile SA, known as SQM, expects demand to grow at 7 percent to 10 percent a year.

Batteries in cars and trucks will be one of the key drivers. Fully electric vehicles contain 44 pounds of lithium carbonate in their battery packs, compared with just one ounce in a notebook computer, Rockwood said in March.

Rapid adoption of electric vehicles may double lithium sales for batteries between 2013 and 2017, then double them again by the end of the decade.

Tesla Gigafactory

Tesla Motors Inc. the electric vehicle maker led by billionaire Elon Musk, is planning a battery “gigafactory” that may consume as much as 17 percent of current lithium output, Goldman Sachs Group Inc. said in February. The $5 billion plant will double global production of lithium-ion batteries using raw materials sourced in North America, according to Tesla.

Rockwood produces lithium by evaporating brine from salt ponds in Chile and Nevada, the only U.S. source of the metal. Albemarle, based in Baton Rouge, Louisiana, has been working since 2011 on cost effective ways to extract as much as 20,000 tons of lithium a year from its bromine salt ponds in Magnolia, Arkansas. The acquisition may accelerate its efforts to start up a second U.S. source.

“To have the world’s leader working with your team certainly will expedite that process,” Kissam said.

Lithium Consolidation

The acquisition is the latest example of consolidation in the highly concentrated lithium industry. It outpaces Chengdu Tianqi Industry Group Co.’s C$673 million ($626 million) purchase last year of Australia’s Talison Lithium Ltd., owner of the world’s largest open-pit lithium mine.

After Chengdu Tianqi outbid Rockwood to buy Talison, it agreed to sell a 49 percent stake in the mine to Rockwood.

Talison, Rockwood, Philadelphia-based FMC Corp. and SQM control about 90 percent 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 a share, or 13 percent more than the July 14 closing price, the companies said in a statement.

Largest Deal

This deal is the largest takeover of a diversified chemicals company since Solvay SA bought Rhodia SA 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.

“It appears that Albemarle shareholders are getting a deal,” John McNulty, a New York-based analyst at Credit Suisse, said in research note yesterday. “With no exclusivity agreement in place and a ‘for sale’ sign officially on Rockwood with only a minimal premium, we believe there may be other potential bidders.”

McNulty, who recommends buying Rockwood shares and doesn’t rate Albemarle, didn’t identify any companies that may make competing bids.

BASF SE, the world’s largest chemical maker, would find Rockwood an attractive target as a pure-play lithium company, Jana Partners LLC and First Analysis Corp. said separately last year. DuPont Co. also would be interested, First Analysis has said, as would SQM, according to Jana. BASF, DuPont and SQM didn’t respond to e-mails seeking comment.

Rockwood, under former CEO Seifi Ghasemi, sold assets that make titanium-dioxide pigment, clay-based additives and ceramics to focus the company on lithium as well as surface treatments used to clean metal and prevent corrosion. Ghasemi stepped down last month to lead Air Products & Chemicals Inc.

“As we watched them continue to divest those businesses and become a pure-play lithium and surface-treatment company, it became increasingly interesting,” Kissam said.

Copyright 2014 Bloomberg

Lead image: EV via Shutterstock

CURRENT MAGAZINE ISSUE

03/01/2015
Volume 18, Issue 3
file

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

FEATURED PARTNERS



EVENTS

Using Grid data analytics to protect revenue, reduce network losses...

Schneider Electric and Awesense have combined expertise to develop integ...

Energy Storage USA 2015

Energy Storage USA is the leading conference in the United States focuse...

ImagineSolar | Solar PV Project Experience: Advanced 5-day Workshop...

40 Advanced Credit HoursAdvanced 5 Day WorkshopIREC Accredited Continuin...

COMPANY BLOGS

Helping Small Businesses Visualize Savings

    What does a small business owner care about? Most are run...

The Question Trilogy

    It’s crucial to learn what your prospect needs from...

Harnessing the #ElonEffect: Deconstructing the PR Success of Tesla’...

As most of the world has heard by now, Tesla and its co-founder, Elon Mu...

SOCIAL ACTIVITY

Tweet the Editors! @megcichon @jennrunyon

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS