In a bold move amid challenging conditions in the electric vehicle (EV) market, Rio Tinto, the Anglo-Australian mining giant, has revealed plans to acquire Arcadium Lithium, a U.S.-based lithium company, for an impressive $6.7 billion. This acquisition is viewed as a strategic investment in the future of energy transition, especially following a recent slowdown in electric vehicle sales.
With this deal, Rio Tinto aims to position itself among the top producers of lithium, joining industry leaders like Albemarle and SQM. The company has offered $5.85 per share for Arcadium, which represents a staggering nearly 90% premium over Arcadium’s closing price of $3.08 on October 3, the day before news of the potential acquisition broke.
This strategic purchase will provide Rio Tinto with a diverse portfolio that includes lithium mines and processing plants located in Argentina, Australia, Canada, and the United States. These assets are anticipated to play a critical role in producing batteries for electric vehicles and other applications. Notably, Rio Tinto will also gain access to a customer base that includes major automakers such as Tesla, BMW, and General Motors.
Despite recent drops in lithium prices due to oversupply from China and weakening EV sales, Rio Tinto is optimistic about the long-term outlook for the lithium market. The current landscape has made many lithium miners attractive targets for acquisition, particularly as demand for electric vehicles has shown signs of slowing.
Industry leaders are expressing concerns over the decline in EV growth. For instance, Toyota recently announced that it would delay the launch of its EV production in the U.S. until 2026, while Ford and Volvo have also postponed their transitions to electric vehicles. In the UK, new EV registrations saw a modest increase of just 3.7% in September compared to the previous year, whereas registrations for diesel vehicles surged by approximately 17.2%.
Jakob Stausholm, CEO of Rio Tinto, described the acquisition of Arcadium as a “countercyclical expansion” that aligns with the company’s disciplined capital allocation strategy. He emphasized that the timing of this acquisition offers an opportunity to increase their stake in a high-growth market at a pivotal point in the cycle.
Peter Coleman, chair of Arcadium, pointed out that the cash offer provides shareholders with “certainty and liquidity,” protecting them from the volatility that often accompanies the lithium market. Since the start of the year, Arcadium’s shares have dropped by over 37%, bringing its valuation down to $4.56 billion.
Jason Beddow, managing director of Argo Investments—a fund manager with shares in Rio—expressed positivity about the acquisition. “Yes, it’s a significant premium, but stocks have been heavily sold off,” he noted. After visiting the companies’ Canadian operations, Beddow highlighted the geographical proximity and shared access to Quebec hydropower between the two firms. He also remarked on Rio’s established chemicals business in Canada, suggesting that this could facilitate a smooth integration of Arcadium’s operations.
The acquisition has received unanimous approval from the boards of both companies and is expected to be finalized by mid-2025.
