August 23, 2012 / 12:52 PM / in 5 years

Battery demand fuels Rockwood's Talison Lithium buy

(Reuters) - Chemicals producer Rockwood Holdings Inc ROC.N agreed to buy Talison Lithium Ltd TLH.TO for C$724 million ($729 million) to expand in Asia and boost its output of lithium used in batteries for electric cars and cellphones.

Demand for lithium batteries has risen in recent years as they are more efficient and help cut carbon emissions. The rising popularity of smartphones, which need longer-running batteries, has also helped.

Talison supplied about 80 percent of lithium demand in China, the world’s biggest autos market, the company said in January.

“The rationale for everything we do in lithium is to be ready for expected growth in electric vehicles that run on lithium batteries. There is also power tools like power drills and pharmaceuticals,” Timothy McKenna, a spokesman for Rockwood, told Reuters.

Rockwood, whose peers include Kronos Worldwide Inc (KRO.N), Sensient Technologies Corp (SXT.N), WR Grace and Co (GRA.N) and Valhi Inc (VHI.N), has said it expects battery-grade lithium products to show double-digit sales growth this year.

Lithium business accounted for 14 percent of Rockwood’s June quarter sales of $905.6 million. Perth, Australia-based Talison’s sale of lithium concentrate rose 8 percent to 365,545 metric tons (402,944 tons) in the fiscal year ended June 30.

Rockwood will control 55 percent of global lithium supply once the deal closes, David Davidson, an analyst at Paradigm Capital wrote in a note to clients. Talison had a 32 percent share of the global supply market, he said.

Princeton, New Jersey-based Rockwood said on Thursday it will pay C$6.50 per Talison share, a 53 percent premium to the stock’s Wednesday close on the Toronto Stock Exchange.

“The premium reflects the quality of Talison, a pure-play lithium concentrate producer with a strategic asset and customer base, that either met or exceeded our own modeled expectations on essentially every metric quarter on quarter,” Davidson said.

Talison shares rose 52 percent to an 18-month high of C$6.47. Rockwood fell about a percent to $47.09 in noon trade on Thursday on the New York Stock Exchange.

Rockwood plans to finance the acquisition -- its biggest deal till date -- using cash on hand and new debt financing.

Lazard advised Rockwood while Talison was advised by Macquarie Capital in Australia and Canada.

Editing by Joyjeet Das and Sriraj Kalluvila

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