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Rumours run rampant as lithium giant Liontown commences due diligence

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2023-09-11

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Shareholders in Liontown Resources will know in mid October if US lithium giant, Albemarle will turn its indicative $3 a share takeover offer into cold hard cash.

Liontown told the ASX on Monday that the due diligence agreed to in the statement a week ago, had been agreed to and would start shortly.

"Liontown and Albemarle have now agreed the terms of that non-disclosure and exclusivity agreement, and Albemarle is expected to commence its due diligence shortly.

"It is expected that Albemarle's due diligence will take approximately four weeks.

That due diligence will be on an exclusive basis, subject to customary fiduciary exceptions (see the summary attached).
Liontown again told shareholders they do not need to take any action at this stage.

The statement saw the Liontown shares ease to $3.02 from the high of $3.04 late last week amid suggestions of a rival blocking shareholder emerging.

Speculation is rife at present with what could be going on behind the scenes at the Kathleen Valley Lithium Project.

One rumour late last week was that Gina Rinehart's Hancock Prospecting could have been buying Liontown shares in recent sessions.

Hancock Prospecting is believed to currently own a 4.9% stake in the lithium developer. This keeps it just below the 5% threshold that would force it to show its hand as a substantial shareholder.

There is a suggestion Hancock might want a 10% blocking stake in Liontown. That would prevent Albemarle from taking Liontown private.

Hancock is thought to be the buyer because the deals last week were undertaken by Euroz Hartleys, which has acted on Rinehart's behalf in the past.

Media reports have suggested that Perth based Mineral Resources (MinRes) could be interested in joining Hancock.

MinRes and Albemarle were close two years ago but have spent the past 18 months slowly going their own ways.

MinRes at net cash of $1.4 billion at June 30 and debt of $1.9 billion - in other words gross debt of $3.3 billion. That is too high a figure for investors to stomach an equity issue where the deal cost on the table is $A6.6 billion.

To convincingly top Albemarle’s $3 a share offer, bank finance would be needed for MinRes and probably for Hancock. Liontown has little cash flow and is struggling to complete its Kathleen Valley mine on budget.

There are also suggestions that Albemarle might partner up with Hancock and MinRes, but seeing the US company has been heading off on its own in the Australian lithium business, it would seem odd that it would reverse course for a deal where it would not have control. 

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