Rockwood Holdings Inc. (NYSE: ROC), a chemical producer, has reached an agreement with Talison Lithium Ltd (TSE: TLH). Rockwood will buy Talison for around $729 million, enabling it to expand in the Asian market and ramp up production of lithium, which is used widely in making batteries for electronic devices and electric cars.
Talison supplies around 80 percent of China’s lithium demand. China is also the world’s biggest automobiles market.
"The rationale for everything we do in lithium is to be ready for expected growth in electric vehicles that run on lithium batteries. There is also power tools like power drills and pharmaceuticals," Timothy McKenna, a spokesman for Rockwood, told Reuters.
Rockwood has stated that it anticipates double-digit growth in sales for its battery-grade lithium products. Lithium comprised around 14 percent of Rockwood’s June quarterly sales of $905.6 million. Talison’s sales of lithium concentrate closed at 402,944 tons, or up by 8 percent, for the fiscal year ended this June.
Following closure of the deal, Rockwell will control 55 percent of the world’s lithium supply. Talison’s share is around 32 percent of the world’s supply market.
Under the terms of the deal Rockwood is paying Talison a 53 percent premium. The news saw Talison’s shares go up 52 percent to C$6.47, while Rockwood fell slightly less than a percent to $47.09.
This is Rockwood’s biggest transaction so far, and it will finance it through cash and new debt financing.