UPDATE 3-Albemarle to buy rival Rockwood for lithium boost

Tue Jul 15, 2014 10:46am EDT

* Deal valued at $6.2 bln

* Albermale to pay $50.65 in cash and 0.4803 in stock

* Offer represents 13 pct premium to Rockwood's Monday close

* Rockwood's shares rise 14 pct (Adds analysts' comments; updates shares)

By Swetha Gopinath and Kanika Sikka

July 15 (Reuters) - Chemicals maker Albemarle Corp said it would buy rival Rockwood Holdings Inc for $6.2 billion to tap fast-growing demand for lithium products used in mobile phone and automobile batteries.

Rockwood shares rose nearly 14 percent to $86 at market open on Tuesday in heavy volume, slightly above Albemarle's offer of $85.53 per share. Albemarle shares rose 5 percent to $76.02.

"Growth prospects for lithium are better than for any of Albermale's existing businesses," said Suntrust Robinson Humphrey analyst James Sheehan. "They want to capture the upside potential from electrification of automobiles that's likely to occur over the next several years."

U.S. sales of electric vehicles soared to 167,617 in 2013 from 345 in 2010, according to a report published in January by the U.S. Department of Transportation-funded Electric Vehicle Transportation Center. (bit.ly/1wpRMi6)

The deal will give Albemarle access to Rockwood's assets in the Atacama Desert, Chile, providing a low-cost base for lithium production.

The combined company will also have a strong presence across three other high-margin businesses - supplying catalysts to refineries, bromine for use in offshore drilling and emission control, and surface treatment products to the automobile and aeroplane industries.

The deal diversifies Albemarle's portfolio away from bromine, which is in transition between growth cycles, and catalysts, which have very lumpy order patterns, Jefferies analyst Laurence Alexander wrote in a note.

Rockwood shareholders will get $50.65 in cash and 0.4803 Albemarle shares for each share they own. Albemarle said it had secured financing from BofA Merrill Lynch to fund the cash portion of the deal.

Albemarle expects about $100 million in annual savings by 2016 from the deal.

Rockwood, under ex-CEO Seifi Ghasemi, hived off its clay-additives and titanium-dioxide businesses to narrow its focus on lithium and metal surface treatments.

EARNINGS CATALYST

Albemarle said it expected the Rockwood deal, which will likely close in the first quarter of 2015, to add to cash earnings per share in the first year and to adjusted earnings per share in the second year.

The company, which is due to report second-quarter results on July 30, estimated adjusted earnings per share of $1.08 to $1.11. Analysts on average were expecting a profit of 99 cents per share, according to Thomson Reuters I/B/E/S.

BofA Merrill Lynch is Albemarle's financial adviser. Lazard and Citi are advising Rockwood.

Shearman & Sterling LLP, Troutman Sanders LLP, Kelley Drye & Warren LLP are Albemarle's legal advisers. Simpson Thacher & Bartlett LLP is Rockwood's legal adviser.

Shares of Albemarle, which said it would suspend its share buyback program, gave up their early gains and were down about 2 percent in morning trade on the New York Stock Exchange.

Rockwood shares were up 10 percent. About 740,000 shares changed hands by 1040 ET, more than three times their 50-day moving day average volume.

(Editing by Sriraj Kalluvila)

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