17/11/2024
Rio Tinto Energises Move into Lithium
This week’s key terms/concepts:
• Counter-cyclical strategy: An economic approach for a business to make business decisions against the trends of the economy or their specific industry. This can be in the form of investment during an economic downturn, or pulling back resources during an economic boom.
• Market Expansion: Strategies aimed at ensuring business growth in new geographic areas, or through existing products being made available in unexplored markets.
• Synergy: The process of combining the performance of two different businesses or teams to create a greater outcome than their individual efforts, such as a merger.
Last month, mining company Rio Tinto announced a definitive agreement on acquiring Arcadium Lithium for US$6.7 billion, a transaction that will transform the company into the world’s third largest lithium producers. Linklaters’ transatlantic team advised Rio Tinto throughout the acquisition, securing a core asset critical to Rio Tinto’s decarbonisation plan and emissions-reduction goals by 2030.
Why is this important?
With the rising demand for electric vehicles (EVs) and a global push towards renewable energy solutions, the demand for lithium batteries has risen substantially. However, with Tinto’s access to several lithium deposits, the company can shield themselves from the price volatility likely to occur in the future. Tinto now holds lithium mines as well as aluminium and copper operations, allowing them to independently create lithium batteries, holding a monopoly on a future dependent on renewable sources of energy. Companies that produce EVs such as BMW and Ford believe that the UK’s zero-emission vehicle (ZEV) mandate – a policy intended to phase out petrol and diesel car sales in favour of EVs in the next 6 years – is unsustainable. However, Rio Tinto’s plan of counter-cyclical expansion positions itself to thrive in a volatile market and supports both EV production and the electrification of multiple sectors.
What is the significance for Linklaters?
Linklaters play a large role in advising Rio Tinto throughout this merger, placing themselves at the forefront of shaping the global energy landscape. Acting as lead legal advisor, the firm acknowledged the agreement as a ‘transformational step’ to power up its M&A practice in the US. This is an important step for Linklaters to continue strengthening their position within the US legal market- with the likes of the A&O Shearman merger in May and the recently proposed Herbert Smith Freehills / Kramer Levin merger, the firm continues to show it can lead large transactions in evolving industries.
The transaction’s approval by Rio Tinto and Arcadium Lithium requires other closing conditions to be met, such as regulatory approvals, and is expected to close mid-2025.
Lex Weekly 