Lithium Americas (LAC) inked a deal to acquire Millennial Lithium Corp (TSE:ML) in a stock-cum-cash transaction worth $400 million. The deal puts an end to months of bidding takeover war against China’s Contemporary Amperex Technology Co Ltd (CATL).
Shares of Lithium Americas, which specializes in advancing lithium development projects, gained 3.5% to close at $32.92 on November 17. (See Lithium Americas stock charts on TipRanks)
Meanwhile, Millennial is involved in the development of its flagship lithium brine project, located in Argentina.
Terms of the Transaction
According to the acquisition agreement, every Millennial shareholder will receive C$4.70 per share, payable in Lithium Americas common shares, and an additional cash payment of C$0.001 per Millennial share. Consequentially, Millennial shareholders will own about 9.1% of Lithium Americas.
Notably, the deal price implies a significant premium of 27.4% over the closing price of C$3.69 for Millennial shares on the TSX Venture Exchange, as of October 29, 2021, the last trading date before Lithium Americas’ made a proposal to acquire Millennial.
Before signing the deal with Lithium Americas, Millennial terminated its previous agreement with CATL dated September 28, 2021, as CATL failed to match the offer. Notably, the deal price represents a whopping premium of 22.1% to the price offered by CATL earlier.
The acquisition is expected to close in January 2022, subject to certain regulatory approvals. Upon completion, Millennial Shares and Warrants will be delisted from the TSX Venture Exchange.
Synergies of the Acquisition
The acquisition of Millennial’s Pastos Grandes lithium brine project in Salta province, which is in close proximity to the Lithium Americas’ Caucharí-Olaroz project, will offer an attractive regional growth opportunity leading to significant synergies going forward.
Furthermore, the deal is expected to enhance Lithium Americas’ growth pipeline.
Management Weighs In
Sharing his long-term outlook on the deal, Lithium Americas CEO, Jonathan Evans, commented, “This transaction is a rare opportunity to add a complementary lithium brine project and leverage our expertise developing Cauchar-Olaroz as the largest new lithium carbonate operation to come online in over 20 years.”
He further added, “We are confident Pastos Grandes can provide significant value for all shareholders as we execute on our growth strategy in the region over the coming years.”
Millennial CEO Farhad Abasov stated, “The high premium to the CATL Arrangement Agreement highlights the quality of the Pasto Grandes project and the efforts by the Millennial team over the past four years.”
Jefferies analyst Laurence Alexander maintained a Buy rating on Lithium Americas with the price target of $39 (18.547% upside potential).
Consensus among analysts is a Moderate Buy based on 6 Buys and 4 Holds. The average Lithium Americas price target of $29.78 implies 9.54% downside potential to current levels. However, shares have gained 205% over the past year.