Project Description

FMC Corp Spin-off (Livent Corp)

On August 2, 2017 in its 10-Q, FMC Corp (FMC) noted that it would continue to operate its Lithium segment as a standalone business and intends to spin-off the segment in the future. In February 2018, FMC Corp announced that it plans to IPO 15% of its Lithium business in late Q3 / early Q4 2018. It intends to spin-off the remaining 85% stake approximately 6 months after the IPO.

Background per a Reuters article:

FMC Corp (FMC.N) is planning a $500 million initial public offering of a stake in its lithium business on the New York Stock Exchange this fall, its chief financial officer told Reuters on Monday, an avenue for investors to gain exposure to the booming electric vehicle market.

Lithium is a key ingredient in the lithium-ion batteries that power electric cars, a market that is forecast to surge in coming decades on government regulation to cut pollution and customer preferences for “green cars”.

U.S.-based FMC, which is primarily a pesticides maker, is planning to sell off around 15 percent of its lithium business in the IPO late in the third quarter or early fourth quarter, CFO Paul Graves said in an interview.

That would give the lithium business a market value of more than $3 billion, below that of lithium giants such as Chile’s SQM SQMa.SN and U.S.-based Albemarle Corp (ALB.N) but ahead of newer Australian lithium market entrants.

About six months after the IPO, FMC plans to spin out its remaining 85 percent stake in the lithium business to its existing shareholders. They will end up holding shares in the agricultural company and stock in a new, standalone lithium company.

FMC will retain no stake in the lithium business, Graves said, adding that the unit, which comprises only about 10 percent of FMC’s annual revenue, was taking up more and more management time due to investor interest in the sector.

“We think there is a lot of merit in separating it and allowing lithium to have access to its own equity financing, its own balance sheet, to attract, develop and retain its own management team,” he said.

Asked if anything could prevent an IPO, Graves said it could get delayed if market conditions deteriorated.

Shares in lithium producers plunged on Monday after Morgan Stanley said it expects lithium prices to peak in 2018 and then decline 45 pct by 2021 as demand growth falls far short of what’s needed to absorb sharp supply increases through to 2025.

By comparison, FMC expects there to be a lithium deficit in 2025, with expected demand of around 1 million tonnes not being met by supply of around 700,000 tonnes.

“This is an industry that has repeatedly failed to bring on its supply in the way it predicted. It is always late and it is always more expensive to operate,” Graves said.


Horizon Kinetics Commentary on Lithium Market June 9, 2017

WSJ – FMC to Focus on Core Business with Spin-off February 2, 2018

Motley Fool – FMC Lithium IPO and Spin-off May 17, 2018

Motley Fool – Is FMC Corp a Buy? August 2o, 2018