Guess which ASX lithium share is sinking 17% on takeover disappointment

This lithium developer has received an approach. What is it worth to shareholders?

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The Galan Lithium Ltd (ASX: GLN) share price is catching the eye on Tuesday.

In morning trade, the ASX lithium share is down 17% to 12.5 cents.

Why is this ASX lithium share sinking?

Investors have been selling the lithium developer's shares this morning after it released an update on takeover speculation.

In response to media speculation, Galan Lithium revealed that it has not received a takeover bid but has received an unsolicited, confidential, conditional, non-binding indicative proposal from Energy Exploration Technologies, Inc. (EnergyX) in relation to a potential acquisition of its Argentinian lithium assets.

According to the release, EnergyX's proposal is to acquire assets and real property held by Galan related to its holdings in Salar del Hombre Muerto and Candelas for US$50 million in cash and US$50 million in EnergyX shares.

It would also receive a 10% gross revenue royalty for 10 years starting from commercial production.

General Motors (NYSE: GM) and a consortium led by South Korean conglomerate Posco Holdings are investors in EnergyX.

What is Galan Lithium?

Galan Lithium's flagship assets are lithium brine projects, Hombre Muerto West (HMW) and Candelas. These are located on the Hombre Muerto Salar in Argentina, within South America's lithium triangle.

Hombre Muerto is known to host lithium brine deposition of the highest grade and lowest impurity levels within Argentina. It is home to the established El Fenix and Sal de Vida lithium operations owned by Arcadium Lithium (ASX: LTM) and the Sal de Oro project owned by POSCO.

Galan Lithium is also exploring at Greenbushes South in Western Australia, just south of the tier one Greenbushes Lithium Mine.

Offer response

Galan Lithium has not made a decision on the proposal at this point and warned there's no certainty that it will lead to anything concrete. It commented:

The Proposal is conditional on, amongst other things, completion of satisfactory due diligence and negotiation and execution of definitive, binding transaction documentation. The Proposal remains subject to consideration by Galan's board, and given the early stage nature of discussions and its conditionality, there is no certainty a transaction will eventuate. Given the Proposal contemplates the disposition of Galan's main undertaking, Galan shareholder approval would be a necessary condition to completion under a binding agreement, if such an agreement were to eventuate.

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