FMC Corp. (FMC 0.74%) is separating its lithium business from its core agricultural chemicals business, with the first leg of the parting coming up in October.
Investors have known for some time that the Philadelphia-based company had plans to do this, but it was only late last month when FMC filed with the Securities and Exchange Commission (SEC) for an initial public offering (IPO) that more details came out.
Here are five things you should know about FMC's lithium IPO and spinoff.
Image source: Getty Images.
1. New lithium company's name and ticker symbol
FMC's lithium business will be named Livent Corp. -- which is a play on the chemical symbol for lithium, "Li." The stock will trade on the New York Stock Exchange (NYSE) under the ticker symbol LTHM.
2. Logistics of the separation into two companies
FMC's separation of its lithium business from its agricultural technology business will occur in two parts:
- The company is planning to sell up to $100 million worth of shares of Livent through the October IPO, according to the SEC filing. (The $100 million can be thought of as just a placeholder and is subject to change. FMC has previously said it planned to offer shares totaling about 15% of the lithium business.) No target price range per share was provided, so we can't evaluate valuation.
- The remaining shares of Livent will be spun off to FMC shareholders within six months of the IPO.
So investors have two ways to invest in the new lithium company -- directly or indirectly by buying FMC stock.
On that note, shares of FMC are in the red 4.6% in 2018 through Sept. 21, versus the S&P 500's 11.1% return, which we can primarily attribute to concerns among some investors that a lithium glut could occur and drive down prices. Over the three-year period, the stock remains a big winner, with a return of 147% -- 2.5 times the broader market's 59.2% return. Investors poured money into lithium stocks in 2016 and 2017 amid rising demand and prices for lithium, largely driven by an increased need for compounds to make the rechargeable batteries that power electric vehicles. Shares also got a boost last year from FMC's acquisition of a portion of the crop protection business at the former DuPont, now known as DowDupont.
3. Livent will be the largest lithium pure play trading on a major U.S. stock exchange
Livent will give investors in the U.S. an opportunity to invest in a pure-play stock of a major lithium producer.
Both the world's largest and second largest producers of lithium, North Carolina-based Albemarle (ALB 0.12%) and Chile-based Sociedad Quimica y Minera de Chile, or SQM (SQM -2.22%), respectively, are listed on the NYSE, but neither is a pure play. China's Ganfeng Lithium, FMC, and China's Tianqi Lithium round out the top five players, though not necessarily in that order.
4. What Livent's lithium business will look like
Following is a snapshot of FMC's lithium business in the second quarter. These numbers, of course, will change in the three-plus-month period between the end of Q2 and the Livent IPO.
|
Lithium Revenue Q2 2018 |
Growth (YOY) |
Lithium Revenue As a % of Total Revenue |
Lithium EBITDA* Q1 2018 |
Growth (YOY) |
Lithium EBITDA As a % of Total EBITDA |
|---|---|---|---|---|---|
|
$107.9 million |
46% |
8.5% |
$51.2 million |
85% |
14% |
Data source: FMC. *Earnings before interest, taxes, depreciation, and amortization (EBITDA). YOY = year over year.
FMC's lithium business is highly profitable. In the second quarter, its profit margin -- on an EBITDA basis -- was 47.5%.
For context, in the second quarter:
- Albemarle's lithium revenue jumped 30% year over year to $317.6 million, comprising 37% of its total revenue, while its lithium segment's adjusted EBITDA increased 22.9% to $141.6 million, accounting for 55% of total adjusted EBITDA.
- SQM's lithium revenue increased 22% year over year to $183.9 million, comprising 50% of its total revenue, while its lithium business' gross profit rose 11% to $119.0 million, accounting for 53% of the company's consolidated gross profit.
5. Livent's top leaders
Paul Graves, who leads FMC's lithium business, will be the CEO of Livent; Gilberto Antoniazzi, CFO of FMC's agricultural solutions business, will be CFO; and Pierre Brondeau, FMC's CEO and board chair, will also chair Livent's board.
