On Monday, the Liontown Resources Ltd (ASX: LTR) share price stormed notably higher.
This was driven by news that Albemarle Corporation (NYSE: ALB) has increased its takeover offer for the lithium developer.
Albemarle has increased its offer from $2.50 per share to $3 per share, which values Liontown at $6.6 billion.
And while the offer remains non-binding, management revealed that it would be willing to accept the proposal if it became binding. As a result, it has granted due diligence access to Albemarle.
Are shareholders getting a good deal with the Liontown takeover?
The team at Bell Potter has been running the numbers and appear to believe the Liontown takeover is fair given project execution risks. It commented:
LTR is within 12 months of first production; the next 18 months (project completion and commissioning) being a heightened risk period for any new project. We expect the ALB and LTR Boards see the revised proposal as a balance of value and these risks; for LTR, a valuation floor. LTR is now in play, and we see medium likelihood of a superior competing proposal.
As for Albemarle shareholders, it feels they should be happy with the Liontown takeover given its strong strategic fit. The broker adds:
LTR's Kathleen Valley stands out as one of few largescale, long-life lithium developments expected to come online over the next twelve months; located in one of the world's best mining jurisdictions. LTR is the perfect "bolt-on" acquisition for any group looking to expand existing lithium operations or enter the battery minerals supply chain. LTR is a strong strategic fit for ALB, looking to secure upstream lithium supply and feed for its Kemerton lithium hydroxide facility. ALB has strong relationships with the US automotive industry; LTR has offtake agreements with Ford and Tesla. Lithium supply from Australia is US Inflation Reduction Act compliant.
In light of the recent rise in the Liontown share price, the broker has downgraded its shares to a hold rating with a $3.35 price target.
