The merger is expected to create a top five global lithium chemicals company
Galaxy Resources agrees to merge with rival Australian lithium company Orocobre. (Credit: Galaxy Resources Limited)
Rival Australian lithium chemical companies Orocobre and Galaxy Resources have signed an AUD4bn ($3.09bn) merger of equals deal.
The merger deal is aimed at creating a top five global lithium chemicals company, based on the recent market capitalisation.
The companies have entered into a binding merger implementation deed (MID) in this regard. Under the MID, the miners will merge through a scheme of arrangement, pursuant to which Orocobre will acquire 100% of Galaxy Resources’ shares.
The combined entity will assume a new name in due course of time. Its head office will be in Buenos Aires, Argentina, while its corporate headquarters will be on the Australian East Coast.
Apart from that, the merger will bring together highly complementary portfolio of assets with geographical and product diversification in brine, hard rock, and vertical integration spanning the supply chain.
Orocobre operates the Olaroz lithium facility in Argentina. It also has ownership in Borax Argentina, a boron chemical and mineral producer, and Advantage Lithium, Canada-based lithium company.
On the other hand, Galaxy Resources has a portfolio of lithium projects, at different stages of development, in Australia, Argentina, and Canada.
Martín Pérez de Solay, the present CEO and managing director of Orocobre will continue in the same roles in the enlarged company, post-merger.
De Solay said: “The merger brings together assets and teams with highly complementary skills and knowledge, with a unique opportunity to create a leading independent lithium company.
“The merger consolidates the combined group’s position in Argentina and will give us significant operational, technical and financial flexibility to deliver the full value of our combined portfolio.”
As per the terms of the deal, Orocobre will issue 0.569 of its shares for each of the Galaxy Resources’ shares.
Post-merger, Orocobre’s existing shareholders will have a stake of 54.2% in the combined entity, while Galaxy Resources’ shareholders will own the remaining stake of 45.8%.
Galaxy Resources chairman Martin Rowley said: “This transaction has the potential to be a significant value-creating 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.”
The merger is subject to Galaxy Resources’ shareholder approval, court approval, and other conditions.