Albemarle

History

2024: Mass layoffs as demand for electric vehicles declines

On January 17, 2024, the American company Albemarle, the world's largest lithium producer, announced plans to reduce costs. As part of this program, the number of personnel will be reduced. In addition, the company will reduce investment.

Albemarle has faced difficulties amid falling prices for lithium, a metal that is used in batteries for a wide range of electronic devices as well as electric vehicles. Due to the rise in the cost of electrified transport, the growth rate of demand for it decreased, which led to a decrease in lithium supplies.

Albemarle announces plans to cut costs

Albemarle said in an official statement that the company is taking measures to optimize its cost structure. It is expected that expenses will decrease by about $95 million per year, including $50 million in 2024. To achieve these goals, a decrease in staff will be required: the number of dismissed employees as of mid-January 2024 is not named. It is also said that Albemarle's investment in 2024 will range from $1.6 billion to $1.8 billion against $2.1 billion a year earlier.

The actions we are taking enable us to accelerate growth in the short term and maintain opportunities for future development as we focus on the dynamics of our key end markets. The long-term fundamentals of our business are strong and we remain committed to sustainability, "Albemarle CEO Kent Masters said.

The company intends to delay investments in its North Carolina technology fleet, as well as cap capital costs for maintaining health, safety, environmental and facility maintenance projects. In addition, costs for the Richburg lithium processing plant will be cut.^[1]

2023

Disruption to $4.2 billion acquisition of Australia's Liontown Resources

Lithium giant Albemarle Corp. pulled out of its $4.2 billion acquisition of Liontown Resources Ltd. after a group of anti-takeover Australian shareholders created a blocking minority.

Albemarle representatives have been preparing for the purchase of the company for several months. The primary objective was the Kathleen Valley Project - one of Australia's most promising fields.

In September, Liontown agreed to the US company's "best and final" offer of A $3 per share, a near 100% premium to the price before Albemarle's interest in the takeover was revealed in March.

However, Australian mining company Hancock Prospecting Pty. under the leadership of Gina Rinehart, in just a couple of weeks, it was possible to consolidate 19.9% of the shares of Liontown. This has become enough to block the voting of shareholders on the deal. Albemarle has now notified Liontown that it will not proceed with the deal due to "the growing complexities surrounding its implementation."

Rinehart made her fortune in Western Australia's iron ore mines during the infrastructure boom in China. Investment in Liontown is taking place against the backdrop of a deterioration in the prospects for the steel industry, and the growing interest of investors in rare earth metals, which will be in great demand as part of the energy transition. Liontown is the most significant lithium investment at this time by Hancock Prospecting Pty.

Representatives of Hancock in October 2023 said that the company is looking to gain "a noticeable impact on the future of Liontown."

Obviously, such aggressive actions towards Albemarle investors cannot go unanswered, wrote Rybar. The collapse of the deal forces Liontown to seek an alternative source of capital for its flagship Kathleen Valley project. After mobilizing all resources to buy a 19.9% stake in Liontown, from Hancock Prospecting Pty. there are simply no funds for additional investments in large projects. Liontown could face banks cutting funding for development of the Kathleen Valley project, according to John Bishop, an analyst at Jarden Securities. This will significantly increase the likelihood of other investors selling shares.

The consequences were not long in coming. According to Bloomberg, on October 20, 2023, shares of Liontown lost their last bullish rating (buy recommendation), and on October 23, Citigroup and Goldman Sachs Group lowered the company's ratings. The downgrade will force some investors to get rid of the company's shares and complicate borrowing.

In simple words, the situation can be described as follows: Albemarle, relying on the resources of large investors, made a good offer to buy. This can be called an attempt at a civilized raider seizure, although there were no formal violations of the law. But the intervention of the local player disrupted these plans, and the rating of the rebellious company began to be lowered, limiting access to financial resources necessary for development. This does not mean the destruction of the company. Its capitalization, scale of activity and profit will simply decrease. On the example of this transaction, the mechanism for controlling financial and commodity markets by the Big Three companies is very clearly visible.

The attack from Albemarle focused primarily on gaining access to raw materials, which were subsequently supposed to be processed at the company's facilities. And the actions of representatives of Hancock Prospecting Pty. aimed at developing recycling in Australia. Gina Rinehart now faces non-trivial challenges in attracting funding and finding partners to process lithium directly in Australia.

According to Citigroup analyst Kate McCutcheon, a counter cash offer to buy back 100% of Liontown's shares from Hancock is unlikely as existing supply agreements are blocked until 2030.

Against this background, representatives of Liontown turned to UBS Group with a proposal to lead the process of raising capital to finance the Kathleen Valley project. So far, the discussion is private. The amount of funds planned to be raised through UBS was not disclosed. Trading in the stock has been suspended at Liontown's request as the company seeks to complete the funding process for key projects.

Lithium giant Albemarle, meanwhile, continues to look for other targets in Australia and beyond. The company names lithium resources, processing technology and battery disposal as the most promising areas.

Fine of $218 million for bribing officials

On September 29, 2023, the US Department of Justice announced that Albemarle Corporation, the world's largest lithium producer, agreed to pay more than $218 million for bribing officials. According to the case file, the company participated in corruption schemes to pay bribes to civil servants in many foreign countries.

This is a violation of the US federal Foreign Corrupt Practices Act (FCPA). It regulates "the facts of offering, promising, providing tangible and intangible benefits to any foreign official." That is, the law prohibits companies from bribing foreign civil servants in the interests of their business.

The world's largest lithium producer Albemarle will pay $218 million for bribing officials

The investigation into Albemarle was initiated by the Department of Justice and the U.S. Securities and Exchange Commission (SEC). It was established that between 2009 and 2017, Albemarle, through its third-party sales representatives and employees of subsidiaries, conspired to bribe government officials in Vietnam, Indonesia and India to conclude profitable contracts with government customers. As a result, the company made a profit of approximately $98.5 million.

In particular, as stated in the materials of the US Department of Justice, in Vietnam, Albemarle dishonestly received contracts at two state oil refineries. In Indonesia, the company used a corruption scheme to conclude a contract with a state-owned oil company. In India, Albemarle bribed officials to keep the catalyst business alive.

As part of the agreement, Albemarle agreed to continue to cooperate with the Department of Justice "in any ongoing or future criminal investigations related to this inappropriate conduct."^[2]

Notes