What happened? Late on Friday, Reuters reported that Rio Tinto (+) in talks to buy Arcadium Lithium (NR, ALTM US) as discussions continued throughout LME Week in London. Talks remain ongoing with an offer expected ''in the near future'', according to the report, and with a valuation between USD 4-6bn or higher. Arcadium shares, which are -55% YTD, jumped as much as +34% post-market. Implied valuation multiples vary significantly depending on the time period for EBITDA used. Based on the USD 4-6bn range reported, EV/EBITDA would be 9-14x based on 2025 consensus but 4-6x based on 2027 consensus. BNPP Exane View: Speculation has been around for some time that Rio Tinto would look to buy something in lithium and earlier in the day it was reported by The Australian that Arcadium and Albermarle (NR, ALB US) could be in its sights. CEO Jakob Stausholm has signalled a clear interest in lithium and a conceptual acquisition of Arcadium would fast track those ambitions by making it a top-3 producer globally vs a more prolonged time period to get that scale from its own development projects Rincon (Argentina) and Jadar (Serbia). There had been significant shareholder concern that Rio would develop Jadar and add more supply to a currently oversupplied market, which has pushed the narrative more recently to buy vs build. 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. Near-term metrics of a potential deal screen is expensive, but this is the right time in the cycle to make an acquisition as RIO is a clear long-term believer in lithium and we prefer buy vs build at this stage. 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. In...