Talison board warms to Chengdu Tianqui bid

A subsidiary of Chinese conglomer-ate Chengdu Tianqi Industry Group has raised its offer price for Talison Lithium (TLH-T) from $7.15 to $7.50 per share, and the Australian lithium producer’s board and its largest shareholder, Resource Capital Funds, is recommending the offer to shareholders.

Windfield Holding’s higher bid trumps an earlier $6.15-per-share offer from Rockwood Holdings (ROC-N), which the New Jersey-based chemical maker said last month was its “best and final offer.” Rockwood has a few days, however, to match the Tianqi Group’s latest bid.

The US$7.50 offer price represents a 15% premium to Rockwood’s proposal and a 77% premium to Talison’s $4.24-per-share closing price on Aug. 22, a day prior to the proposal announcement.

The Chinese group with interests in battery making and lithium production also committed to a US$25-million cash deposit in an Australian bank as a reverse-break fee. The Tianqi Group is Talison’s largest customer, and one of the largest producers of lithium chemicals in China.

Australia’s foreign investment board gave its stamp of approval to the Chinese takeover on Nov. 23.

Jonathan Lee, a battery technology and material analyst at Byron Capital Markets in New York, argues that a higher bid from Rockwood is unlikely, and reasons that the acquisition makes strategic sense for Windfield because its related company, Tianqi, is dependent on ­Talison for its raw material, and is also a marketer for Talison’s material in China.

The US$25 million Windfield has deposited in a trust fund in an Australian bank also demonstrates its commitment to the deal, the analyst adds, and “gives us comfort that Windfield is serious about the strategic asset to build its existing lithium processing businesses.”

Lee believes Windfield “may vertically integrate Talison’s operation with its downstream lithium processing company, Tianqi Lithium Industries,” and also that “with a US$577-million market capitalization, US$30 million in cash and US$7 million in income, the acquisition will be accretive to Tianqi’s Chinese lithium operations.”

Talison has produced lithium from its Greenbushes operation in Western Australia for more than a quarter of a century.

News of the higher bid and the agreement between the two companies sent Talison’s shares up 44¢, or 6.4% to $7.31, on a trading volume of 5.4 million shares.