Rio Tinto (RIO.US) issues $9 billion investment-grade bonds to support its acquisition of Arcadium Lithium.

On Tuesday, mining giant Rio Tinto (RIO.US) raised $9 billion in investment-grade bonds to fund its acquisition of Arcadium Lithium. The bond sale attracted more than $50 billion in investor orders, indicating strong market recognition of Rio Tinto's financing activity. According to insiders, Rio Tinto sold eight different maturity corporate bonds, with a 40-year yield 1.33 percentage points higher than comparable U.S. Treasuries.

Rio Tinto officially announced the completion of its acquisition of Arcadium Lithium, with a transaction value of $6.7 billion. Earlier reports suggested that Rio Tinto had considered selling up to $5 billion in equity to help fund the acquisition, but later abandoned the plan.

Rio Tinto had reached an acquisition agreement with Arcadium Lithium as early as October 9, 2024, planning to acquire the company through a cash-only transaction at $5.85 per share. The acquisition offer represented a stunning 90% premium to Arcadium Lithium's closing price of $3.08 on October 4, highlighting Rio Tinto's determination to acquire Arcadium Lithium and its high recognition of the company's asset value.

The transaction marks a significant strategic step for Rio Tinto in its lithium business. Arcadium Lithium will be renamed Rio Tinto Lithium and will integrate Rio Tinto's Rincon lithium project. Rio Tinto will officially become the world's third-largest lithium producer, trailing only Albemarle (ALB.US) and SQM (SQM.US).

Under the terms of the previously disclosed agreement, Rio Tinto will gain access to Arcadium Lithium's lithium mines, processing facilities, and deposits in Argentina, Australia, Canada, and the United States, as well as customers including Tesla, BMW, and General Motors. Rio Tinto Lithium plans to increase its annual production capacity of first-class assets to over 200,000 tonnes of lithium carbonate equivalent (LCE) by 2028, equivalent to 15% of the global lithium supply in 2023.

RBC expects that the lithium business will account for about 4% of Rio Tinto's profits by 2028 after the acquisition. Rio Tinto also said that it expects its EBITDA and operating cash flow to grow significantly in the coming years, thanks to the current booming global new energy industry and rising lithium demand, as well as its own production capacity expansion.