It certainly was a massive week for ASX 200 lithium shares. Investors were piling back into the industry after Liontown Resources Ltd (ASX: LTR) revealed that it had received and rejected a takeover proposal from lithium giant Albemarle at a huge premium.
The good news for lithium investors is that one leading broker believes the mergers and acquisitions (M&A) activity may not be over.
According to a note out of Morgans, its analysts have picked out two more lithium miners that it believes could soon become takeover targets along with Liontown.
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Which ASX 200 lithium shares could be takeover targets?
Morgans believes that Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) could be takeover candidates. It explained:
We see potential for both PLS and AKE to also be considered attractive targets. PLS offers exposure to high quality hard rock while AKE is much cheaper on a resource multiple.
And while the broker also sees Mineral Resources Ltd (ASX: MIN) as an attractive option, it feels a takeover is less likely "given its existing relationships with ALB and Jiangxi."
It is a similar story for fellow ASX 200 lithium share Core Lithium Ltd (ASX: CXO), which the broker believes is less likely to become a target due to "the smaller resource size, higher EV / resource and likely higher cost operations."
Why Allkem and Pilbara Minerals?
Morgans sees Pilbara Minerals as a top option due to its globally significant resource and ability to provide an acquirer with immediate exposure to spodumene and hydroxide. It commented:
We'd flagged LTR as a potential target but it's not the only one. PLS remains one of the few independent lithium producers with a globally significant resource. With assets in operation it would offer an acquirer immediate exposure to spodumene and hydroxide.
As for Allkem, Morgans believes it would be a good target due to its large resource base. However, it concedes that the company is unlikely to be seen as a target for a miner that already has exposure to Argentina. It explained:
AKE is also potentially a target and holds a much larger resource base than PLS. However, the majority of its resource is in Argentina in lithium brines which are typically used for carbonate rather than hydroxide. We think both chemicals will be important over the long run but potential acquirers with pre-existing South American brine exposure may see fewer diversification benefits.
Time will tell what happens, but it certainly is an interesting time for ASX 200 lithium shares.
