Emerging Tier-1 battery minerals producer Liontown Resources rejected on Tuesday Albemarle’s non-binding takeover offer, saying it undervalues the company, Kallanish reports.

US chemical giant Albemarle submitted a non-binding proposal to acquire all Liontown shares at a price of AUD 2.50 or $1.66 each, valuing the Australia-listed firm at AUD 5.2 billion or $3.4 billion. Among other benchmarks, the share price represents a 63% premium to Liontown’s closing share price on 27 March. According to Albemarle, the proposal is a “compelling opportunity” for Liontown shareholders given its “substantial premium.”

However, the offer was unanimously rejected by Liontown board and advisers as it’s not “in the best interests of shareholders.” The company had already rejected two earlier proposals from Albemarle, in October 2022 and March 2023, at AUD 2.20/share and AUD 2.35, respectively.  

“In coming to its decision, the Liontown board noted the opportunistic timing of Albemarle’s indicative proposal, coinciding with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley project,” Liontown says in a statement.

The deal also fails to reflect the “significant” de-risking of the Kathleen Valley project in recent months, with mining operations commissioning, construction progressing to schedule and first production on track for mid-2024, the Australian company says.

It adds Albemarle didn’t take into consideration Liontown’s extensive growth optionality at Kathleen Valley and its broader portfolio; the scarcity value of the project – one of a few lithium assets of such scale, quality and mine life this close to production; the positive near-term outlook for existing and new lithium producers underpinned by a five-fold growth in global lithium demand by 2030; and significant synergies to Albemarle given its existing operations in Australia.

On the other side of the Atlantic, Albemarle says the transaction would be mutually beneficial as it would advance its strategy to produce a high-quality supply of battery grade materials and de-risk the investment of Liontown shareholders.

Albemarle accuses Liontown’s board of directors of not engaging “meaningfully” in discussions to facilitate Liontown shareholders to receive the benefits of the proposal. The major lithium project supplier says it's ready to immediately engage in discussions to work toward a mutually acceptable definitive agreement.

It seems, however, that Liontown isn’t willing to negotiate – at least for now. The company said it’s working on a number of “attractive funding options” to be announced “in the near term.”

At the time of writing, Liontown’s shares were up 68.52%, trading at AUD 2.57 ($1.71).