Lithium, regarded as a critical material by the EU and the U.S., is used in batteries for electric vehicles and mobile devices.Arcadium, the lithium producer that has agreed to sell itself to Rio Tinto, posted an 82% drop in quarterly income on Thursday that missed Wall Street's expectations due to sliding prices of the electric vehicle battery metal.
Much of the lithium industry is contending with a supply glut brought on in part by a softening of aggressive EV adoption rates and oversupply from China. Yet that market imbalance is projected to end later this decade, making Arcadium's portfolio of top lithium projects across the globe a prime target for Rio, which is paying USD 6.7 billion for the company.
Rio CEO Jakob Stausholm first approached Arcadium about a potential deal in June and the mining giant's board proposed USD 5.25 per share, an offer that Arcadium's board rejected, according to a recent regulatory filing.
Negotiations continued and Arcadium eventually agreed to provide Rio with sensitive business information, according to the filings. Reuters was first to report the two sides were in negotiations in early October, and five days later both sides agreed to a sweetened offer of USD 5.85 per share in cash.
"We are excited that this transaction will give us the opportunity to accelerate and expand our strategy," Arcadium CEO Paul Graves said in a statement on Thursday.
Arcadium posted third-quarter net income of USD 16.1 million, or 1 cent per share, compared to USD 87.4 million, or 17 cents per share, in the year-ago quarter. Analysts had expected earnings of 4 cents per share, according to IBES data from LSEG.
Shares of the Philadelphia-based company were unchanged in after-hours trading. They fell about 1% on Thursday to close at USD 5.38.
Given the Rio buyout, slated to close next year, Arcadium does not plan to hold a conference call to discuss the results.
