Arcadium Lithium investors sue it for negligence over US$6.7B Rio Tinto takeover

Arcadium Lithium (NYSE: ALTM; ASX: LTM) is facing legal challenges after shareholders filed lawsuits alleging misrepresentation and negligence linked to Rio Tinto’s (ASX, LON, NYSE: RIO) US$6.7-billion takeover. 

Philadelphia-based Arcadium is countering the claims  – filed in four separate United States courts – with supplemental disclosures to avoid litigation delays and ensuring the transaction proceeds as planned.

The identities of the complainants who filed cases in the New York Supreme Court, including one in Suffolk County on Long Island and two in Manhattan, as well as the size of their shareholdings, have not been disclosed.

Arcadium said it has also been hit with 19 demand letters making similar allegations of misrepresentation, concealment and negligence regarding the high-profile deal.

Shares in Rio Tinto edged less than 1% higher to US$61.32 apiece in New York on Tuesday, valuing the company at US$105 billion. Arcadium’s stock fell 1% to US$5.04 for a market value of US$5.5 billion. 

Despite the disputes, the firm’s board continues to recommend shareholder approval of the buyout, scheduled for a vote on Dec. 23.

The legal challenges contrast with the stance of other investors who have voiced their support for the deal. Two major U.S. investment managers — Calvert and the California State Teachers’ Retirement System — have stated they will vote in favour.

Among world’s top three

Rio Tinto’s offer, announced in mid-October, represents a 90% premium over Arcadium’s market value two days before the bid. However, it remains below the US$10.6-billion valuation Arcadium reached in May 2023, shortly after the merger of its predecessors, Livent and Australia’s Allkem.

The deal requires the backing of at least three-quarters of Arcadium shareholders to proceed. If approved, it would make Rio Tinto one of the largest lithium miners globally, behind only North Carolina-based Albemarle (NYSE: ALB) and Chile’s SQM (NYSE: SQM).

The acquisition would provide Rio Tinto with lithium mines in Argentina and Australia, as well as processing facilities in the U.S., China, Japan, and the United Kingdom. Arcadium’s customer base includes major companies like Tesla, BMW and General Motors.

Although lithium prices have slumped by 90% over the past 18 months, Rio Tinto remains optimistic about the long-term demand for the metal, which is crucial for manufacturing modern batteries used in industrial applications and electric vehicles.

Last week, Rio Tinto announced a US$2.5-billion investment to develop its Rincon project, the company’s first commercial-scale brine lithium mine in Argentina’s lithium-rich triangle.