Orocobre and Galaxy Resources, two of the nation’s top lithium producers, have agreed to a $4 billion merger of equals, to establish a new force in the global lithium sector.
In the deal announced on Monday, the two mining companies said Orocobre would buy Galaxy through a scheme of arrangement, where both Orocobre and Galaxy shareholders, will benefit from the diversification, growth and scale of a top 5 global lithium chemicals company.
The merger creates the 5th largest global lithium chemicals company, amid soaring prices and a solid demand outlook for the key element required in electric vehicle batteries.
Galaxy shareholders would receive 0.569 Orocobre shares for each Galaxy share, ultimately resulting in Orocobre shareholders owning 54.2% per of the combined entity, while Galaxy shareholders will own the remaining 45.8%.
The scheme has been unanimously supported by the Galaxy Board subject to an independent report and no superior proposal emerging. It has likewise been endorsed and supported by the Board of Orocobre, subject to no proposal for Orocobre emerging.
As part of the proposed scheme, Martin Rowley would become Non-Executive Chairman, Robert Hubbard would become Deputy Chairman, and Martín Pérez de Solay would remain CEO and Managing Director of the group, with the remaining Board and management team drawn from the combined group.
A new name for the merged entity would also be selected in due course representing the global reach of the new entity, which will have its head office in Buenos Aires, Argentina, a corporate headquarters on the Australian East Coast and an office in Perth.
Creating a Top 5 global lithium chemicals company
Highly complementary portfolio of assets delivering geographical and product diversification across brine, hard rock and vertical integration across the supply chain
Industry-leading growth profile with enhanced financial position to optimise and potentially accelerate development with the ability and intent to capture further downstream value
Compelling industrial logic with significant value creation opportunities unique to the merger
Highly experienced and complementary Board and senior management teams to drive growth
Potential to generate significant shareholder value with enhanced scale and financial capacity
Galaxy Chairman Martin Rowley commented: “This transaction has the potential to be a significant valuecreating opportunity for Galaxy and Orocobre shareholders. The Scheme provides shareholders of Galaxy with the opportunity to share in the significant benefits of being part of a larger diversified group and the synergies expected to be available to help enhance and progress our portfolio of world class assets. The merged entity's growth opportunities in both brine and hard rock position it uniquely to take advantage of expected rising EV demand for lithium.”
Orocobre Chairman Robert Hubbard commented: “The logic of this merger is compelling. Both Orocobre and Galaxy shareholders, will benefit from the diversification, growth and scale of a top 5 global lithium chemicals company. I take this opportunity to re-iterate the group's ongoing commitment to the principles of delivering the highest level of transparency of our environmental, social and governance performance, the foundations upon which our assets have and will continue to be developed.”
Orocobre shares closed at $6.55 on Monday and Galaxy shares finished at $3.83.