Albemarle has abandoned its $3-a-share, $6 billion-plus bid for Liontown Resources (ASX:LTR)
, leading to an anticipated drop in Liontown's shares on Monday and putting Gina Rinehart's Hancock Prospecting at risk of a substantial paper loss.
The announcement is also likely to trigger a significant sell-off in lithium shares overall.
Albemarle made this decision as it stated that it is "nearing the end of its exclusive due diligence process" regarding Liontown and its primary asset, the Kathleen Valley mine prospect in Western Australia.
In a statement released from the US and to the ASX before trading resumed on Monday at 10 am, Albemarle stated that it "will not pursue a binding agreement to purchase Liontown Resources Limited and has formally withdrawn its non-binding offer to Liontown's Board of Directors."
Kent Masters, CEO of Albemarle, expressed gratitude for the collaboration with the Liontown team, saying, "Our engagement with the Liontown team has been meaningful and productive. We appreciate the level of cooperation we have received, and we thank the entire team for their efforts. That said, moving forward with the acquisition, at this time, is not in Albemarle's best interests."
The company cited "growing complexities associated with the proposed transaction" as a factor in its decision.
This complexity refers to Ms. Rinehart/Hancock Prospecting's accumulation of a 19.9% stake in Liontown, costing around $1.2 billion (most of her shares were purchased at $3 each, following the offer price increase from the original $2.50 a share in early September).
Albemarle did not confirm whether it would sell its reported small stake in Liontown, approximately 3.9%.
The use of the phrase "growing complexities" acknowledges that Albemarle was not interested in negotiating with Ms. Rinehart and Hancock and chose to withdraw from the deal.
Albemarle had previously stated that its $3-a-share offer was its final and best, meaning it cannot return with a lower price for six months (if it chooses to do so, which is doubtful).
The company emphasized its commitment to its long-term growth strategy, including planned expansions, capital allocation priorities, and its status as one of Australia's largest lithium investors with mining assets at Wodgina and Greenbushes and the Kemerton lithium hydroxide plant, currently undergoing a significant expansion.
Now, Ms. Rinehart and Hancock are in a position to control Liontown, but they will need to replace the substantial lithium expertise that the US company provided and face a costly learning curve in marketing spodumene, unless they can reach an agreement with Albemarle to secure some or all of the lithium ore from Kathleen Valley.
Hancock will also need to ensure that Liontown has adequate funding to complete the mine and reassure suppliers that the project will proceed.