Talison’s board recommends Chinese bid

A subsidiary of Chinese conglomerate Chengdu Tianqi Industry Group has raised its offer price for Talison Lithium (TLH-T) from $7.15 to $7.50 per share and the Australian lithium producer’s board and its largest shareholder, Resource Capital Funds, is recommending the offer to shareholders.

Windfield Holding’s higher bid trumps an earlier $6.15 per share offer from Rockwood Holdings (ROC-N), which the New Jersey-based chemical maker said last month was its “best and final offer.” Rockwood still has five days, however, to match the Tianqi Group’s latest bid.

The $7.50 offer price represents a 15% premium to Rockwood’s proposal and a 77% premium to Talison’s last closing price of $4.24 per share on Aug. 22, the day prior to the announcement of Rockwood’s initial proposal.

The Chinese group with interests in battery making and lithium production has also committed to a US$25 million cash deposit in an Australian bank as a reverse break free. The Tianqi Group is Talison’s largest customer and one of the largest producers of lithium chemicals in China.

The Australian Foreign Investment Board gave its stamp of approval to the Chinese takeover on Nov. 23.

Jonathan Lee, a battery technologies and materials analyst at Byron Capital Markets in New York, argues a higher bid from Rockwood is unlikely and reasons the acquisition makes sense strategically for Windfield because its related company, Tianqi, is dependent on Talison for its raw material and is also a marketer for Talison’s material in China.

The US$25 million Windfield has deposited in a trust fund in an Australian bank also demonstrates its commitment to the deal, the analyst adds, and “gives us comfort that Windfield is serious about the strategic asset to build its existing lithium processing businesses.”

Lee believes Windfield “may vertically integrate Talison’s operation with its downstream lithium processing company, Tianqi Lithium Industries” and “with a market cap of US$577 million, US$30 million in cash and US$7 million in income, the acquisition will be significantly accretive to Tianqi’s Chinese lithium operations.”

Talison has produced lithium from its Greenbushes operation in Western Australia for more than a quarter of a century.

News of the higher bid and the agreement between the two companies sent shares of Talison up 44¢ of 6.4% to $7.31 on a trading volume of 5.4 million shares. Over the last year Talison has traded within a price range of $2.84-7.34.