UPDATE 2-Talison shares drop as Rockwood rejects bidding war

Wed Nov 21, 2012 3:54pm EST

* Friendly takeover by Rockwood approved by regulators

* Talison says to engage Tianqi on C$806 mln rival bid

* Talison shares fall 7 percent to C$6.62 on TSX

By Julie Gordon

TORONTO, Nov 21 (Reuters) - Shares of Talison Lithium Ltd dropped more than 7 percent on Wednesday after suitor Rockwood Holdings Inc said it was not interested in a bidding war, even as Talison indicated it plans to open talks with a rival bidder.

Rockwood, a U.S.-based chemical producer, said late on Tuesday that Australian authorities had approved its C$724 million ($725.71 million) takeover of Perth-based, Toronto-listed Talison.

"With this approval, Rockwood has obtained all regulatory approvals," Chief Executive Seifi Ghasemi said in a statement. "Rockwood has no intention of engaging in a bidding process for the acquisition of Talison."

Talison recently completed an expansion at its flagship project in Australia and now has the capacity to produce nearly two-thirds of current global demand for lithium carbonate, which is used in smartphone and hybrid car batteries.

The company said on Wednesday that it would hold talks with Chengdu Tianqi Industry Group Co to determine if the Chinese company's C$7.15-a-share offer, which values Talison at C$806 million, represents a "superior proposal" to the Rockwood deal.

A "superior proposal" takes into account the monetary value of the offer, the likelihood of conditions being attached to a takeover, and the timing required to complete a deal, Talison said.

Talison's board continues to back the Rockwood deal.

Shares of the lithium producer climbed as high as C$7.25 after Tianqi's bid was made official earlier this week. The stock fell to C$6.62 on Wednesday afternoon, well below the Tianqi offer price, but above the C$6.50-a-share Rockwood offer.

Shares of Talison have risen more than 56 percent since Aug. 21, the day before the Rockwood deal was announced, and are up more than 92 percent this year on the Toronto Stock Exchange.

Closely held Tianqi said on Wednesday that it had made offers for more Talison shares, potentially boosting its stake in the lithium miner to 20 percent, conditional on regulator approvals.

STRATEGIC POSITION

Talison has a unique position as an established, pure-play lithium producer with operations in Australia and a strong customer base in Asia, making it an attractive target.

The lithium market has grown in recent years on rising demand for lithium batteries, which fuel smartphones, tablet computers and other portable electronics, along with hybrid and electric vehicles.

Tianqi is the world's largest hard rock lithium converter and makes various raw materials for the battery industry. The Chinese company is a long time Talison customer.

New Jersey-based Rockwood has said a takeover of Talison will allow it to expand into Asia and boost its lithium output to meet rising demand from the battery market.

Lazard Ltd is advising Rockwood while Talison is advised by Macquarie Capital in Australia and Canada. Tianqi's financial adviser is RedBridge Grant Samuel.

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