Arcadium Lithium investors sue miner over Rio Tinto takeover

Last week, Rio Tinto announced a $2.5 billion investment to develop its Rincon project, the company’s first commercial-scale brine lithium mine in Argentina’s lithium-rich triangle.

US miner Arcadium Lithium (ASX: LTM)(NYSE: ALTM) is facing legal challenges as shareholders have filed lawsuits alleging misrepresentation and negligence linked to Rio Tinto’s (ASX, LON, NYSE: RIO) $6.7 billion takeover. 

Arcadium is countering the claims  – filed in four separate US courts – with supplemental disclosures to avoid litigation delays and ensuring the transaction proceeds as planned.

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The identities of the complainants who filed cases in the New York Supreme Court, including one in Suffolk County and two in New York County, as well as the size of their shareholdings, have not been disclosed.

Arcadium said it has also been hit with 19 demand letters making similar allegations of misrepresentation, concealment and negligence regarding the high-profile deal.

Despite the disputes, the firm’s board continues to recommend shareholder approval of the buyout, scheduled for a vote on December 23.

The legal challenges contrast with the stance of other investors who have voiced their support for the deal. Two major US investment managers — Calvert and the California State Teachers’ Retirement System (CalSTRS)— have stated they will vote in favour.

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Rio Tinto’s offer, announced in mid-October, represents a 90% premium over Arcadium’s market value two days before the bid. However, it remains below the $10.6 billion valuation Arcadium reached in May 2023, shortly after the merger of its predecessors, Livent and Australia’s Allkem.

The deal requires the backing of at least 75% of Arcadium shareholders to proceed. If approved, it would make Rio Tinto one of the largest lithium miners globally, behind only US-based Albemarle (NYSE: ALB) and Chile’s SQM (NYSE: SQM).

The acquisition would provide Rio Tinto with lithium mines in Argentina and Australia, as well as processing facilities in the US, China, Japan, and the UK. Arcadium’s customer base includes major companies like Tesla, BMW, and General Motors.

Although lithium prices have slumped by 90% over the past 18 months, Rio Tinto remains optimistic about the long-term demand for the metal, which is crucial for manufacturing modern batteries used in industrial applications and electric vehicles.

Last week, Rio Tinto announced a $2.5 billion investment to develop its Rincon project, the company’s first commercial-scale brine lithium mine in Argentina’s lithium-rich triangle.