Pilbara Minerals (PLS.AX), an Australian lithium miner, has announced its decision to acquire smaller competitor Latin Resources (LRS.AX) for an implied value of A$559.9 million ($369.4 million). This strategic move aims to diversify Pilbara’s operations in the growing lithium market.
Under the all-share agreement, Latin Resources shareholders will receive 0.07 new Pilbara shares for each share they hold, which translates to a valuation of A$0.20 per Latin Resources share. This represents a 66.7% premium over Latin Resources’ last closing price. Following the announcement, Latin Resources’ shares surged by 56%, marking their largest single-day gain since April 2022.
The acquisition will grant Pilbara control over Latin Resources’ flagship Salinas Lithium Project located in Minas Gerais, Brazil, positioning the company to tap into the expanding battery markets in North America and Europe.
However, analysts at Citi cautioned that while Minas Gerais is considered a mining-friendly jurisdiction, Pilbara will need to convince the market that expanding into Brazil is a prudent decision, given the mixed track record of ASX miners in the region. RBC Capital Markets analysts also expressed concerns about “limited operational synergies,” predicting that the deal could negatively impact Pilbara’s earnings in the short term.
In contrast to Latin Resources’ surge, Pilbara’s shares fell by as much as 6.7% on Thursday, reaching their lowest point since August 2022. The board of Latin Resources has unanimously recommended the acquisition, stating it is in the best interest of shareholders in the absence of a better proposal.