Orocobre Limited and Galaxy Resources Limited have announced that they have entered into a binding MID (Merger Implementation Deed). The size of the merger is estimated at $3.1 billion, and together the combined entity would be the 5th largest lithium company in the world.
The merger is an all-stock deal; Orocobree will exchange 0.569 of its shares for every share of Galaxy, and Orocobre shareholders will ultimately own 54.2% of the combined entity, compared to 45.8% for Galaxy shareholders. The deal values Galaxy shares at 3.53 a share, a small discount (2.2%) from the previous day’s close.
The merger comes at a time when a booming EV industry is causing lithium prices to skyrocket, with the projected price growth for lithium ranging from 30% to 100% from the next four years. Together, the two companies, which are both based in Australia, expect to be better able to compete on the international level.
Orocobre is planning to utilize Galaxy’s expertise in the Sal de Vida, which lies within the “lithium triangle” in Argentina and is a huge potential growth opportunity as demand for lithium takes off. Galaxy, as the smaller of the two companies, hopes to take advantage of Orocobre’s larger size and greater resources to capitalize on this growing demand.