Rockwood Holdings Inc., the world’s largest producer of lithium products, agreed to form a joint venture with China’s Chengdu Tianqi Industry Group Co. that will give it a stake in Tianqi’s Australian mining unit.
Rockwood will take a 49 percent stake in a venture controlling Talison Lithium Pty Ltd., with Tianqui holding the other 51 percent, Princeton, New Jersey-based Rockwood said yesterday in a statement.
The U.S. company will contribute to the venture $196 million in equity and a two-year secured loan of as much as $670 million with 8 percent interest. It will also give Tianqi a three-year call option to acquire as much as 30 percent of its European lithium unit.
Tianqi bought Talison in February for about C$706 million ($663 million) after it trumped a competing offer from Rockwood. Talison owns the world’s largest open-pit lithium mine. The metal is used in batteries for iPads, laptop computers and electric cars.
The venture will give Rockwood access to lithium reserves outside of the U.S. and Chile, Chairman and Chief Executive Officer Seifi Ghasemi said in the statement. The deal is expected to close in the first quarter of 2014 after regulatory approvals, the company said.
“It is a surprise as we had thought that Talison as an asset was no longer in play,” Chris Shaw, an analyst at Monness Crespi Hardt & Co., said yesterday in a note. The venture will remove raw-material constraints for Rockwood and add as much as 55 cents a share of earnings in the first year, he said.
Tianqi will contribute $204 million in equity into the partnership. Contributions made to the venture will be used to pay off existing debt and equity holders including Tianqi and Leader Investment Corp., a unit of China Investment Corp., Rockwood said.
Rockwood rose 5.1 percent to $71.94 in New York yesterday, the highest since its 2005 initial public offering.