February 26, 2018 / 10:39 PM / 3 months ago

FMC plans $500 million IPO of lithium business on NYSE in the fall

HOLLYWOOD, Fla. (Reuters) - 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.

    Reporting by Nicole Mordant in Hollywood, Florida; Editing by Lisa Shumaker and Sandra Maler

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