Switzerland-based Glencore PLC has announced its intention to acquire Canadian electric vehicle (EV) battery recycler Li-Cycle Holdings Corp. On March 14, Glencore disclosed its approach to Li-Cycle to discuss a potential acquisition. In a letter addressed to Li-Cycle Chair Jacqueline Dedo, Glencore’s Senior Legal Counsel Adam Luckie proposed that the transaction could help address the company’s operational and capital structure challenges while maximizing overall value.
Louie Diaz, Vice President of Corporate Affairs at Li-Cycle, stated via email that the company has established a board committee to review Glencore’s proposal. However, Diaz cautioned that there is no guarantee a deal will be reached. Glencore has been a significant investor in Li-Cycle, having invested $275 million in the company since 2022.
Li-Cycle has faced uncertainties following the suspension of construction in 2023 on its flagship recycling project in Rochester, New York, due to rising costs. Last year, the U.S. Department of Energy committed $475 million to support the completion of the plant, which has a projected total capital cost of $960 million. However, Li-Cycle was unable to access these funds as it did not meet specific conditions set by the Department.
The company has been grappling with increasing quarterly losses and declining cash reserves, raising concerns about its ability to service existing debt. In his letter, Luckie emphasized the need for Li-Cycle to implement urgent measures to preserve cash, including the cancellation of all outstanding warrants.
Following the announcement of Glencore’s interest, Li-Cycle’s stock surged by 55% on Friday and an additional 32% on Monday, closing at 39 cents. Despite this increase, the company’s valuation remains significantly lower than its previous levels, having fallen over 99% since its peak in February 2021.
If the acquisition proceeds, it is expected to be modest compared to Glencore’s previous multibillion-dollar acquisitions in Canada, such as the 2024 purchase of a 77% stake in Teck Resources Ltd.’s coal operations for approximately $6.9 billion. Given Li-Cycle’s relatively small size, the acquisition is unlikely to attract significant scrutiny from Canadian regulators.
Li-Cycle went public in 2021 through a special purpose acquisition company (SPAC), raising approximately $600 million.
Source: The Globe and Mail
