We already have a notable appetite for lithium merger and acquisition (M&A) activity of late. Could Core Lithium Ltd (ASX: CXO) shares be the next S&P/ASX 200 Index (ASX: XJO) morsel to make the merger plate? Let’s take a look.
At the close of trade on Monday, stock in the lithium hopeful-turned-producer was trading at $1.17 a share, up 0.43%.
M&A heats up among ASX 200 lithium shares in 2023
It’s been a big few months for fans of both M&As and lithium shares.
Of course, the Allkem Ltd (ASX: AKE) merger has been the talk of the town this week. On Thursday, the company announced its plan to join forces with Livent Corp (NYSE: LTHM), creating a $15.7 billion giant.
But before that took the market by storm, we were all talking about Liontown Resources Ltd (ASX: LTR).
The lithium up-and-comer was approached not once, not twice, but three times by giant Albemarle. It announced it had rejected all three offers in late March.
It’s unlikely the excitement of those deals had dissipated before some market watchers began to speculate which ASX 200 lithium share could be next to receive a merger offer. Could Core Lithium be the obvious answer?
Could Core Lithium be next to face merger action?
While there are plenty of reasons Core Lithium could appear to be a tasty investment, some brokers aren’t convinced a suitor will come knocking.
The ASX 200 lithium producer recently outlined multiple factors it believes makes its stock worth looking at. They included its battery-quality product, its newly established cash flows, the Finniss Project’s attractive location, and its secured offtake agreements.
Finniss recorded its first production in the March quarter. Core Lithium is now working to progress the project towards nameplate capacity.
Not to mention, it’s not strapped for cash. It had $97.8 million in the bank and no debt as of 31 March.
It also has a $25 million exploration plan underway, suggesting the company is more focused on organic growth rather than M&A expansion. Though, in a recent presentation, the company said it hopes its disciplined capital allocation will help it assess and value both organic and inorganic opportunities.
But, while there’s apparently a lot to like about Core Lithium for now, it’s unlikely to be a target for merger action, according to Morgans. Its analysts said, as quoted by my Fool colleague James last month:
A takeover bid is less likely given the smaller resource size, higher EV / resource, and likely higher cost operations.
Meanwhile, Goldman Sachs thinks Core Lithium shares are overvalued and worthy of a sell rating. It tips the stock to tumble to 80 cents per share – 31% lower than its current price.
Though, Macquarie was bullish on the lithium share last month, slapping it with a $1.20 price target and an outperform rating – a potential 3% upside.
