What might the Allkem mega merger mean for Pilbara Minerals shares?

Could Pilbara Minerals be gearing up for its own M&A activity?

| More on:
A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Pilbara Minerals share price is rocketing 7% today to trade at $4.88 at the time of writing
  • Its gains come amid news its lithium peer Allkem will be merging with New York-listed Livent to create a $15.7 billion lithium giant
  • Pilbara Minerals' CEO recently shut down talk of potential M&A activity, but broker Morgans has tipped the company as a potential takeover target

S&P/ASX 200 Index (ASX: XJO) lithium share Pilbara Minerals Ltd (ASX: PLS) is rocketing amid news peer Allkem Ltd (ASX: AKE) is to merge with Livent Corp (NYSE: LTHM), creating a $15.7 billion monolith.

Right now, stock in Pilbara Minerals is up 7.25%, trading at $4.88 a share.

Created with Highcharts 11.4.3Pilbara Minerals PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

At the same time, the Allkem share price is soaring 14.37% to $14.765 while Livent shares leapt 5% overnight to close at US$25.50 apiece.

No doubt, some market watchers are wondering what the merger news could mean for Pilbara Minerals.

What might Allkem's merger mean for Pilbara Minerals shares?

Allkem has hit headlines overnight with a merger plan that would make Pilbara Minerals the second largest pure-play lithium share on the ASX.

Pilbara Minerals' $13.6 billion market capitalisation would be dwarfed by that of the entity born from Allkem and Livent. But that's likely the only direct implication the ASX 200 favourite might expect from the merger of its peers.

Still, the news might have left some Pilbara Minerals investors wondering if the lithium giant could kick off its own merger and acquisition (M&A) campaign.

Well, unfortunately for M&A fans, management shut down hopes of any such activity in the near future. Speaking on the release of the company's latest quarterly report, CEO and managing director Dale Henderson said:

We've got a very full plate delivering on our organic growth strategy … that remains the focus and M&A is well down the list.

But that's not to say a suitor won't come knocking for Pilbara Minerals.

Could the ASX 200 lithium stock be a takeover target?

Morgans tipped Pilbara Minerals as a potential takeover target last month after industry giant Albemarle approached the ASX's Liontown Resources Ltd (ASX: LTR), as my Fool colleague James reported.

Interestingly, the broker foresaw Allkem's M&A news, saying:

We see both [Allkem] and [Pilbara Minerals] as potential targets in addition to the ongoing interest in [Liontown]. The relative attractiveness of each depends on the needs of the buyer. 

Morgans noted that Allkem was priced cheaper on some measures, but offered less spodumene.

Meanwhile, Pilbara Minerals was said to offer faster exposure to lithium, but a smaller resource base and was more expensive per tonne of lithium carbonate equivalent. Morgans continued last month:

[Pilbara Minerals'] size would restrict interest to larger mining houses, international chemicals companies, battery producers or OEMs.

The broker has an add rating and a $5 price target on Pilbara Minerals shares.

On the other hand, Goldman Sachs doesn't expect a suitor to knock on the lithium producer's door. The broker has a neutral rating and a $4.10 price target on Pilbara Minerals shares.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Materials Shares

smiling worker stands before power generator technology
Materials Shares

Fortescue shares jump 5% on record performance

This mining giant was in fine form during the quarter.

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Materials Shares

Should you buy Pilbara Minerals shares today?

Let's see if analysts think investors should be buying the lithium giant's shares.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Materials Shares

Expert says this ASX mining stock could rise almost 30%

Let's see which miner is being tipped as a buy for investors right now.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

BHP shares charge higher on record copper and iron ore production

Let's see how the miner performed during the fourth quarter.

Read more »

A man stands with hands on hips surveying construction of three high-rise buildings.
Materials Shares

Building activity on the rise – will ASX materials shares benefit?

New data from the March quarter shows a sharp rise in building activity. 

Read more »

Man smiling at a laptop because of a rising share price.
Materials Shares

Macquarie predicts 11% upside for this ASX materials stock

Here's why the broker is positive on the stock.

Read more »

Miner and company person analysing results of a mining company.
Materials Shares

Rio Tinto share price falls on Q2 update

Let's see what the mining giant reported for the second quarter.

Read more »

a man in a hard hat and high visibility vest smiles as he stands in the foreground of heavy mining equipment on a mine site.
Materials Shares

Could these 3 ASX materials shares be set to double?

This broker has buy ratings and aggressive price targets for these holdings. 

Read more »