"Expand market share to 10% within 5 years"
An OroCobre technician is working at a mine in northern Argentina. (Photo by ENRIQUE MARCARIAN / REUTERS)
[Asia Economy Reporter Yujin Cho] Australian lithium company Orocobre has acquired its competitor Galaxy Resources, creating the world's fifth-largest lithium company, according to reports by The Wall Street Journal (WSJ) and others on the 21st (local time).
According to the reports, Orocobre agreed on the 16th to acquire Galaxy Resources by offering Galaxy shareholders 0.569 shares of Orocobre stock for each Galaxy share. The deal is valued at $1.4 billion.
Orocobre will own 54.2% of the merged company, while Galaxy Resources will hold the remaining 45.8%. The merged company's enterprise value is $3.06 billion (based on the closing price on the 16th). By market capitalization, it ranks fifth globally after Albemarle, SQM, Tianqi Lithium, and Gangbong Lithium.
Martin Perez de Solley, CEO of Orocobre, will serve as CEO of the merged company, leading the company, while Martin Rowley, chairman of Galaxy Resources, will take the position of non-executive chairman of the merged company.
WSJ evaluated that aligned interests, including mining projects under development in Argentina, led to this merger and acquisition.
Leg Spencer, an analyst at global investment bank Canaccord Genuity, said, "Both companies are expected to gain significant synergies based on the Argentina mining project," adding, "If the Argentina project proceeds successfully, they could grow to become the world's third-largest producer by 2025."
In a joint statement on the day, the two companies said, "Through this merger, we will expand lithium production sites and diversify our product portfolio." They also added that sharing information on personnel and trading partners for the Argentina project is expected to result in substantial cost savings.
CEO Martin Perez de Solley said in an interview with Bloomberg News, "Our goal is to supply 10% of the world's lithium within the next 5 to 7 years."
This merger news comes amid soaring prices of key battery raw materials due to the expansion of the electric vehicle market under global energy transition policies.
Lithium, an essential mineral for battery manufacturing, has continued to rise in price this year. Especially, due to Australia's export suspension amid trade conflicts, prices in China, the largest electric vehicle market, have surged significantly. According to BloombergNEF, battery demand is expected to increase about tenfold by 2030.
Global investment bank Macquarie forecasted, "Lithium-ion batteries contain 7-10% lithium, so they will be the biggest beneficiaries of the expanding electric vehicle market."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
