Liontown share price explodes 59% on new Albemarle takeover approach

It has been a stunning day for the Liontown Resources Ltd (ASX: LTR) share price.

In morning trade, the heavily shorted lithium developer’s shares are roaring 59% higher to a 52-week high of $2.42.

This is quite a turnaround for the Liontown share price, which was down as low as $1.29 just a little over a month ago, as you can see on the chart below.

Why is the Liontown share price rocketing higher?

Investors have been scrambling to buy the company’s shares this morning after it revealed that it has received and rejected a takeover approach from lithium giant Albemarle (NYSE: ALB).

According to the release, Albemarle made an unsolicited, conditional, and non-binding indicative proposal to acquire all of the shares in Liontown at a price of $2.50 per share via a scheme of arrangement.

This proposal was subject to a number of conditions before it would become binding. These include Liontown providing exclusive due diligence, the Liontown board unanimously recommending the proposal, regulatory approvals, and entry into a mutually acceptable scheme implementation deed.

Interestingly, this isn’t the first time that Albemarle has been knocking on the company’s door. It previously had two other proposals rejected by Liontown. The first was for $2.20 per share in October and the second was earlier this month on 3 March for $2.35 per share.

The release also highlights that RT Lithium, a subsidiary of Albemarle, has been building a stake in Liontown through on-market purchases. Based on the most recent share registry information available, RT Lithium holds ~2.2% of Liontown’s issued shares.

Why did it reject the offer?

Liontown has labelled the takeover proposal as opportunistic. It explained:

In coming to its decision, the Liontown Board noted the opportunistic timing of Albemarle’s Indicative Proposal, coinciding with recent softness in companies exposed to the lithium sector and the pre-production status of the Kathleen Valley Project.

Management also believes the offer fails to reflect other factors, such as the scarcity value of the Kathleen Valley Lithium Project. It notes that “there are few other lithium assets of this scale, quality and mine life this close to production in Australia, one of the most attractive mining jurisdictions in the world.”

Whether Albemarle returns with another improved offer, only time will tell. But in the meantime, the Liontown board will keep shareholders and the market fully informed of further developments as appropriate.

Furthermore, it is business as usual for the company. Management notes that the company continues to progress a number of attractive funding options for the remaining capital at the Kathleen Valley Lithium Project and expects to update the market on this front in the near term.

The post Liontown share price explodes 59% on new Albemarle takeover approach appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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