Albemarle is acquiring Rockwood for cash and stock in a fixed exchange of 0.4803 of an Albemarle share for each share of Rockwood and $50.65 in cash. The deal traded at a negative spread after its announcement in July likely because a potential partner for Rockwood's lithium business said during the auction it was not able to pursue a transaction until October. In recent weeks, however, the deal has traded at a relatively wide spread.
The spread Thursday was $2.96, or 3.8%, in from about $3.95 at the close Wednesday. On an annualized basis if the merger closes Jan. 31, the current spread represented a return of about 14%.
The merger goes to a shareholder vote of both Albemarle and Rockwood shareholders on Nov. 14.
Albemarle shares declined about 20% after the merger was announced July 15. Albemarle reported earnings up 5% and an increase of 9% in revenues, which exceeded the expectations of sell-side analysts.
On the investor's call announcing earnings Thursday, Albemarle reiterated strong support for the Rockwood deal. Albemarle pitched the strategic rationale of the combination the that puts its bromine derivatives specialty chemicals operations with Rockwood's lithium salts operations. Albemarle restated its long-term interest in entering the lithium market and the value of combining the technology of the two companies. Albemarle also said it has identified synergies beyond its initial expectations for the deal and has higher confidence in realizing the synergies.
Nevertheless, in response to an analyst, Albemarle noted that the biggest milestone for the deal is the shareholder vote. Albemarle said that having recent conversations with its shareholders, it remains confident about the merger and their support in the upcoming vote.
Proxy solicitors have yet to opine on the deal.
The merger is expected to clear the EU antitrust authorities in the fourth quarter and China's Ministry of Commerce in the first quarter of 2015.