Rockwood hasn’t ruled out Talison takeover Rockwood Holdings holds out hope it could still choose to go after Talison again. Its cash is still at ready.
Author: Kip Keen Posted: Tuesday , 19 Feb 2013 HALIFAX, NS (MINEWEB) -
An outbid rival still lies in wait, cash ready to pounce, if its opponent’s Chinese financing fails to materialize on a major lithium acquisition.
In December last year two lithium giants, Rockwood Holdings and Chengdu Tianqi, had a brief takeover dust-up over Talison Lithium, a premiere lithium producer that operates the Greenbushes lithium mine in Australia.
In a C$724 million cash-ready deal for Talison, Rockwood aimed to dominate about half the world’s lithium market, adding, roughly speaking, Talison's 30 percent market share to its 20 percent.
But Talison's chief customer in China, Chengdu Tianqi, usurped Rockwood’s plans, eventually making what Talison’s board deemed a superior offer worth $847 million.
Rockwood declined to enter a bidding war.
Here’s the really interesting bit: Rockwood, which has enough cash to outright buy Talison, has yet to dedicate monies once destined for the Talison takeover to alternative goals, namely debt repayment. And it doesn’t intend to until the Chengdu Tianqi deal is a sure thing.
On Tuesday, Rockwood Chairman and CEO Seifi Ghasemi said as much in answer to analyst questions during a conference call.
While Ghasemi didn’t commit to going after Talison were his rival’s financing to fall through, he made it very clear Talison was still very much in its sights and, by extension, that he wasn’t completely convinced Chengdu Tianqi would necessarily pull off the Talison takeover.
Ghasemi first said that Rockwood would hold onto its cash until “Talison is sold to somebody else.”
He later added, “That seems to be a prudent thing to do, just in case.”
Just in case, of course, Chengdu Tianqi can’t get a financing done to underpin its $847 million Talison offer.
To be sure, Talison’s board, which is well acquainted with Chengdu Tianqi as its largest customer, is comfortable with the promise of financing from its sizeable funding partners. Otherwise it wouldn’t have considered the bid superior.
In a takeover scheme booklet Talison says Chengdu Tianqi already has $700 million in funding commitments from state-owned China Development Bank and Twenty Two Dragons Limited, a company owned by ADM Capital, of Hong Kong.
Alternatively, Talison also states in the booklet that Chengdu Tianqi can source funding from other parties. It just has to prove it has firm commitments by February 25, two days before a shareholder meeting for a vote on the deal, and then the full deposit has to be in place on March 26, the day the deal is set to be implemented.
But that the takeover offer doesn’t come with cash in the bank, so to speak, leaves open the possibility Chengdu Tianqi may still not line up financing in time to close the Talison takeover.
This isn’t how Talison sees it. But clearly Rockwood is watching for such an opening, through which it may then decide to go after Talison again.
Financing uncertainty - relative to the surety of its cash - is a facet of Chengdu Tianqi’s offer that Rockwood has sought to exploit ever since Chengdu Tianqi emerged to outbid it for Talison.
Last year Ghasemi warned in a prepared statement that its initial and final offer represented “deal certainty” and that “A vote against the deal would be a lost opportunity for the Talison shareholders and could leave them without any transaction." (Talison ditches Rockwood in favour of Chinese suitor’s C$850m takeover bid.)
Ghasemi wasn’t predicting outright in the conference call that Chengdu Tianqi bid would fail. By and large he said he wouldn’t comment on the Chengdu Tianqi deal given its “sensitivity.”
But he did state, nebulously, that as far as this ongoing transaction, “we know a lot.” What Ghasemi meant by that wasn’t clear.
Then he made his comment about it being prudent for Rockwood to hold onto its cash “just in case.”
But as the case very well may be, Chengdu Tianqi may already have its funding lined up. As noted, it’s under no obligation to prove definitive commitments until February 25 or make a deposit for about a month thereafter.
A Talison spokersperson noted in an email to Mineweb that while Chengdu Tianqi had not yet updated Talison on the status of financing, Talison wasn’t expecting it to until February 25.
Finally, if the deal goes through as Talison expects, Rockwood, the patient hunter, will be forced to abandon its chase and perhaps then, as noted in these pages, it turn to other quarry.