Lithium giant Albemarle Corporation (NYSE:ALB) recently disclosed its “best and final” offer to acquire Liontown Resources, an Australian lithium mining company. The latest proposal offers A$3 cash per share, representing a 20% increase from the previous offer, and values Liontown at $6.6 billion.
ALB has previously made offers with prices of $2.50 per share on March 27, $2.35 on March 3, and $2.20 on October 20, 2022. Liontown had rejected all these proposals, stating that they were too low.
Regarding the latest proposal, the Liontown board recommended that shareholders vote in favor of the proposal if there are no other competitive bids. Also, following Albemarle’s latest proposal, Liontown granted ALB a limited period of due diligence.
What Drives Albemarle’s Interest in this Deal?
The demand for lithium, the new white gold, continues to remain strong. The silvery-white metal is used for a range of products, from batteries for electric vehicles and mobile phones to hydrogen fuel storage, air conditioning systems, and pharmaceuticals.
Furthermore, the decrease in lithium prices, following their peak last year, has led to a decline in mining company stock prices. This, in turn, has spurred an increase in industry consolidation.
Through this deal, ALB will solidify its presence in Australia, where Liontown holds considerable potential as an early-stage lithium project. Additionally, Albemarle will gain from Liontown’s supply agreements with major automakers like Tesla (TSLA) and Ford Motor (F).
What is the Price Target for ALB?
Wall Street analysts expect the ALB stock price to reach $262.53 in the next 12 months, on average. Moreover, analysts are cautiously optimistic about the prospects of the stock, with a Moderate Buy rating based on 13 Buys, three Holds, and one Sell. The stock has been down 2.7% in the past three months.
