This article is a summary of a podcast conversation between Will Heath & Antonella Pacitti analysing their recent deals and M&A market trends and direction.
Will Heath (WH) We're talking about two of the biggest announced public M&A deals of the year in Australia, and also globally - Newmont's acquisition of Newcrest, and Allkem's merger with Livent. We’ll talk about some of the themes and learnings.
Antonella Pacitti (AP) Mining and Metals M&A has been insulated from some of those downward pressures that we're seeing in other sectors as a result of macroeconomic shifts including interest rates and inflation.
WH Tell us about your first deal - Allkem and Livent?
Public M&A with a purpose - transition focused dealmaking
AP Public M&A with a purpose is how I am casting this lithium deal. It is effectively a merger of equals type transaction to combine Livent, that is more of a chemicals producer, with Allkem, which is more renowned for mining hardrock lithium and brine. The deal brings together the companies under a global platform, and a more integrated offering. It will result in a 56-44% split between Allkem and Livent shareholders. The deal involves a ‘New Co’ or ‘top-hat’ structure, under which a Jersey-incorporated New Co will be listed on the New York Stock Exchange, with shareholders in Australia having the opportunity to hold the merged entity’s stock through CDIs that will be quoted on ASX.
WH You said at the time when the deal was announced that that the merger promises to be transformative for Allkem because it creates a leading global integrated lithium producer, that it was indicative of an incredibly exciting market. You also said as the energy transition continues to gather pace, you anticipate more of this type of cross border deal making. Why is that?
AP Allkem is a miner, explorer and developer of hardrock lithium and brine, but wasn't able to offer a vertically integrated end solution. So how to deliver that integrated solution to the supply issues around lithium? Livent had that proven capability. The merged entity will be better positioned to accelerate the development of those projects and to get that product to end consumers in the timeframe that's necessitated by this energy transition. It’s really being able to pursue the opportunities on the timeframe that the energy transition requires. Doing that organically is probably not going to get you where you need to get.
WH There's been quite a bit going on in that space, with President Biden and PM Anthony Albanese jointly announcing projects that are intended to strengthen the supply chain for critical minerals potentially, and in the US the US inflation Reduction Act and green loans. Do you think those sorts of things are going to drive more deals?
AP It's an existential issue that we're facing here with the energy transition. Companies are really looking for the most attractive home for their project or their listing. Some of the US regulatory and legislative steps encourage a differentiation between clean energy proponents and those in more conventional areas of the market. If you can, as a lithium producer or a rare earths producer, harness existing capability, or take advantage of or arbitrage a particular regulatory environment, then there will be deals to do. We’re certainly going to see a lot more in lithium, as well as energy transition generally.
The Newmont - Newcrest deal: strength in commodities
Alongside in copper and gold, Will, tell us about the Newmont – Newcrest deal?
WH We were delighted to help our client Newmont reach agreement for the acquisition of Newcrest. Newcrest is principally listed on ASX and Newmont on NYSE. Newmont will buy Newcrest in a share-for-share exchange. And as part of that Newmont will apply for a secondary foreign exempt listing on ASX and for its CHESS Depository Interests to be quoted on ASX.
- Schemes just got easier - Federal Court changes to documentation requirements
- Offering less to get more - harnessing the power of a scheme structure
- Airhugs & Bearhugs, what do the latest target tactics mean?
- The Global M&A mood – on the ground in New York for the International Bar Association’s M&A Conference
- Return to main page
AP Will, what did we do on this transaction?
WH A full spectrum of M&A work including managing a range of cross border regulatory issues – anti-trust, foreign investment and country-specific approvals. We drew on a range of specialist knowledge within the team including from our mining gurus Scott Langford and you, and specialists like Simon Cooke on competition, and Greg Protektor in tax.
Talking tactis - airhugs everywhere
AP There was a really interesting tactical element employed from the Newcrest perspective in responding to the Newmont approach. Tell us about that?
WH In essence, Newcrest announced that it had received a non-binding offer from Newmont and, while it hadn’t rejected or recommended that offer, it was amenable to providing limited due diligence subject to Newmont signing a non-disclosure and standstill agreement. We saw this happening across the market including with TPG's bid for Invocare and Blackstone's bid for Crown last year. Our partner, Dan Natale has coined this the ‘Airhug’ and has explained this in his M&A in the City piece, which we encourage you to read. It is a really interesting piece from Dan!
Looking forward - a promising second half?
AP Are we going to be able to replicate this in the second half of calendar 2023?
WH We think there’s a good chance of more mining and minerals deals, both in the energy transition sector, but also more generally in commodities that are strong. Companies will look at Newmont and Newcrest, particularly in the gold sector and say, if that goes well, what does that mean for us?
And at the same time, our team has also been working on a couple of unsolicited deals in the market. The Helius approach for example. Do you think we might see some hostile or unsolicited M&A, return to the takeover bid?
AP Combine market opportunity with private capital at your disposal, you might have a nice combination that creates a takeover bid opportunity for those who've got cash to splash and don't have shareholders in a listed company to concern themselves with. We might also be seeing a little bit of restructuring M&A. And certainly for companies that have a proven track record and ability to convert, I think there will always be opportunities.
