Lithium Americas Corp. has topped a takeover bid from a giant Chinese battery maker for Millennial Lithium Corp. , potentially sparing Ottawa from having to make a tricky call around national security.
Vancouver-based Lithium Americas said in a news release it will pay $4.70 worth of Lithium Americas stock and one-10th of a cent in cash for each Millennial share. The transaction value is US$400-million.
Millennial, also based in Vancouver, is developing an early-stage lithium brine project in Argentina called Pastos Grandes. Lithium Americas is also developing a lithium project in Argentina, but it is much further along, with a mine already in construction, and first production expected next year.
“The addition of this highly complementary lithium brine resource further enhances our long-term growth strategy in Argentina and leverages our technical and development expertise,” Lithium Americas said about its planned acquisition of Millennial.
China’s Contemporary Amperex Technology Co. Ltd., or CATL, in September tabled a $3.85-a-share cash offer for Millennial. Had its bid been successful, the deal would have had to pass a security screening from Ottawa. If the federal government suspects a foreign takeover could be a threat to Canada’s national security, it can be rejected.
Canada has rejected takeover deals on national security concerns in the recent past. Late last year, Ottawa rejected the takeover of Canadian gold miner TMAC Resources Inc. by China’s Shandong Gold Mining Co. Ltd. In that instance, the strategic location of TMAC’s gold mine in the Canadian Arctic near military installations raised concerns.
Ottawa is also increasingly screening takeover deals from the viewpoint of whether they could jeopardize the country’s supply chain in certain critical minerals. Lithium is one of a select list of critical battery metals that has seen its demand explode over the past decade with the mass adoption of electric vehicles and government commitments to reduce carbon emissions. Both Ottawa and Washington have made it clear they plan to co-operate in building secure supplies of critical minerals such as lithium, as fears intensify about the growing stranglehold of China on supplies.
China is moving fast to shore up global lithium supplies and Millennial isn’t the only Canadian company to attract the superpower’s attention. Last month, Toronto-based Neo Lithium Corp. agreed to a $960-million acquisition by state-owned Zijin Mining Group Co. of China. That deal will also be subject to a security screening from Ottawa.
Investors will now watch to see whether CATL responds with an even higher offer for Millennial.
“CATL has very deep pockets so we would consider a counter bid from CATL as likely,” Matthew O’Keefe, an analyst with Cantor Fitzgerald, wrote in a note to clients. Mr. O’Keefe also thinks that Lithium Americas stands little chance if CATL digs in its heels. He sees CATL topping Lithium America’s bid by “at least 20 per cent,” which would signal “this is a bidding war they can’t win.”
Unlike Lithium Americas, CATL is one of the biggest players in the lithium industry. It makes electric car batteries and is a major supplier to Tesla Inc. CATL’s market valuation of US$239-billion dwarfs Lithium America’s $4.3-billion.
Shares in Millennial closed at $4.77 apiece on the TSX Venture Exchange on Tuesday.
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