Orocobre and Galaxy Resources’ merger set to create a lithium giant

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Summary

  • Under the merger scheme, Orocobre will acquire 100% shares of Galaxy Resources to complete the merger deal.
  • A new entity with a new name will be formed after a successful merger with its head office in Argentina.
  • The merged entity will enjoy vertical integration of the entire lithium supply chain and would have growth projects on upstream as well as downstream side.
  • The merged entity will be included in the ASX 200 index as per their combined market cap.

ASX-listed lithium companies Orocobre Limited (ASX:ORE) and Galaxy Resources Limited (ASX:GXY) have announced a possible merger via a Galaxy Scheme of Arrangement.

The possible merger of the two lithium players will create one of the most geographically diversified lithium producers, which will have a combined annual production capacity of 40kt. The combined entity will be placed among the top five lithium focused companies globally. The combined entity is expected to be included in the ASX 200 index with enhanced liquidity and capital market profile.

Also Read: Do you know these exciting lithium projects geared-up to fuel EV revolution?

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Good Read: Three ASX lithium stocks riding high on EV boom

Merger Overview

Under the Galaxy Scheme of Arrangement, Orocobre will acquire 100% shares of Galaxy. For every Galaxy share held, Galaxy shareholders will receive 0.569 shares of Orocobre. Upon the successful completion of the merger, Galaxy shareholders will own 45.8% shares of the new entity while Orocobre shareholders will own the rest 54.2% shares.

The merged entity will have a new name, which will be announced soon. Buenos Aires, Argentina has been chosen as the headquarters of the merged entity, whose corporate headquarters will be on the Australian East Coast.

Read here: Five Lithium penny stocks that are packing a punch

The current CEO and Managing Director of Orocobre, Mr Martin Perez de Solay, will continue to serve as the CEO and MD of the merged entity. Mr Martin Rowley, Non-Executive Chairman of Galaxy Resources, will be appointed as the Non-Executive Chairman of the merged entity, while Mr Robert Hubbard of Orocobre will serve as the Deputy Chairman. These appointments will be effective for 12 months, and after that, both will have to retire from their respective positions.

Synergies to Create a Lithium Behemoth

The merger of the two lithium players will lead to a vertically integrated company diversified across geographies with a significant portfolio of upstream and downstream growth projects. The projects will enjoy the combined capability and expertise of the merged entity with shared intellectual property.

Also read: Galaxy Resources (ASX:GXY) Readies to Ride the Lithium Bandwagon 

The merged entity will cater to a broader customer base and will leverage increased scale in existing joint marketing relationships.

Copyright © 2021 Kalkine Media Pty Ltd. (Data source: Company update, 19 April 2021)

Project Profiles

The merged entity will have diversified vertically integrated projects ranging from downstream to upstream.

Share Price Movement

The merger deal news did not impact the share price of Galaxy Resources during the early hours of trading. The shares of GXY were marginally up by 0.83% to A$3.64 per share at 11 AM (AEDT). The shares of Orocobre soared 4% today till 11 AM. ORE crossed its 52-week high and is trading at A$6.45 with a market cap of A$2.13 billion.

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