Millennial Lithium (ML.V) has entered into a definitive agreement with Lithium Americas (LAC, LAC.TO) whereby the latter will acquire Millennial Lithium for a total value of C$4.70 per share to be settled in new shares of LAC and a cash payment of C$0.001. The issue price of the new LAC shares hasn’t been set which makes this an attractive deal as the total ratio will actually depend on the share price of LAC when the deal closes so there’s no arbitration possibility while even a drop in LAC’s share price will not result in LAC paying less than C$4.70/share; it would simply have to issue more shares to make up for the lower share price.
It’s clear this indeed represents a superior proposal compared to the C$4.60 cash offer by CATL, but we can’t rule out another counter-offer yet. China needs lithium and additional sources of lithium, and its main issue is that there are several countries where a mining project owned by a Chinese company may be frowned upon. In Australia, for instance, there would for sure be pushback and an almost certain review by a government agency while it seems very unlikely a Chinese company would be allowed to purchase a majority stake in a US deposit.
This means the list of projects and countries where a Chinese majority ownership in a commodity project would be welcomed is small and large companies like CATL can easily afford to pay an additional $20M or $40M if it helps the company to secure its supply chain for the next few decades. It’s surprising CATL hasn’t matched the Lithium Americas offer, but the special meeting to vote on the deal has only been set for January 6th, so CATL still has some time if it wants to come back to the table.
Disclosure: The author has no position in Millennial Lithium. Please read our disclaimer.
