Shares of Arcadium Lithium (ALTM) gained in pre-market trading on Tuesday after the lithium mining company announced that its shareholders had voted in favor of a $6.7 billion sale to Australian mining giant Rio Tinto (RIO). In fact, according to Reuters, nearly 98% of shareholders backed the deal.
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This approval marks a significant milestone for both companies, setting the stage for Rio Tinto’s expansion in the rapidly growing lithium market.
RIO Expects to Benefit from the Deal
The acquisition is expected to close by the middle of next year. It will result in Rio Tinto becoming the world’s third-largest lithium producer, trailing only Albemarle (ALB) and SQM (SQM). Furthermore, this acquisition will result in RIO gaining direct access to Arcadium’s vast lithium assets. These assets include ALTM’s key lithium mines, processing plants, and deposits spread across Argentina, Australia, Canada, and the United States. Moreover, Rio Tinto will inherit some prominent customers of Arcadium Lithium, including electric vehicle giants like Tesla (TSLA) and BMW, positioning the company for long-term growth.
RIO-ALTM Deal Has Not Been Without Challenges
However, the acquisition has not been without its challenges. Arcadium faces legal obstacles as some shareholders have filed lawsuits, accusing the company of misrepresentation and negligence related to the deal. These lawsuits could potentially delay the closing of the deal, adding an element of uncertainty.
Is ALTM a Good Stock?
Analysts remain sidelined about ALTM stock, with a Hold consensus rating based on two Buys and 11 Holds. Over the past year, ALTM has declined by more than 20%, and the average ALTM price target of $5.88 implies an upside potential of 18.3% from current levels.
