What happened? Following Reuters reporting late last week that RIO was in discussions with Arcadium Lithium (NR), and both companies confirming an approach was made, this morning RIO has announced its acquisition of Arcadium in an all-cash transaction valued at USD 6.7bn. A call will be held this morning by both management teams at 9:30am UK time. BNPP Exane View: Valuation wise, the USD 6.7bn is at the upper end of the ''USD 4-6bn or higher'' per Reuters from last week and probably a bit above what most investors anchored around (USD 6bn) early this week. The transaction represents a 90% premium on Arcadium''s closing price of USD 3.08/sh on 4 October 2024 and a 39% premium to the VWAP since Arcadium was created on 4 January 2024. Implied multiplies based on 2025 and 2027 consensus EBITDA is 15.3x and 6.7x. The transaction is expected to close mid-2025. For as much as the industry has been criticised in the past for deals done pro-cyclically this potential deal would appear to be counter-cyclical with the lithium price nearly -60% y/y and -85% vs its 2022 peak. As we highlighted in our note earlier this week (here), this all-cash transaction will put little strain on RIO''s balance sheet where we see 2025 standalone net debt/EBITDA of 0.3x moving to 0.5x on a proforma basis. Growth capex related to Arcadium is anticipated be c5% of RIO''s group capex guidance of up to USD 1bn in 2025 and 2026. Arcadium has been one of the few producers to have rolled out direct lithium extraction (DLE) at its El Fenix site on Argentina''s Hombre Muerto Salar. Rio is testing a form of its own DLE technology at its Rincon brine project. At its recent Investor Day, Arcadium unveiled 2027 production targets of 170ktpa LCE by 2028 (vs. 75ktpa today) which was down from the 250ktpa in 2027 pitched ahead of last year''s merger of Livent and Alkem which created Arcadium.