Mining firm, Rio Tinto, has had a $6.7bn (£5.12bn) takeover bid accepted for US chemical company, Arcadium Lithium.

Philadelphia-based Arcadium was formed in the merger between Livent and Australian company, Allkem, and boasts mining operations in Argentina and Australia, as well as processing facilities in the US, China, Japan and the UK.

It currently has approximately 2,400 employees across its global operations.

The deal represents a 90% premium on Arcadium’s closing price of $3.08 (£2.35) per share on 4 October, set at $5.85 (£4.47).

Rio Tinto said that the deal, which was first discussed earlier this week, will bring Arcadium’s "world-class, complementary lithium business" into its portfolio, establishing a "global leader in energy transition commodities".

Chief executive officer at Rio Tinto, Jakob Stausholm, said: "Acquiring Arcadium is a significant step forward in Rio Tinto's long-term strategy, creating a world-class lithium business alongside our leading aluminium and copper operations to supply materials needed for the energy transition.

"Arcadium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realise the full potential of its tier one portfolio. This is a counter-cyclical expansion aligned with our disciplined capital allocation framework, increasing our exposure to a high-growth, attractive market at the right point in the cycle."

Arcadium provides the lithium needed for electric vehicles, with customers including BMW, Tesla and General Motors.

Despite the customer base for the mineral, lithium prices have fallen this year due to over-availability in the market, with Arcadium’s share price dropping by 60% since the start of 2024.

Senior equity analyst at Hargreaves Lansdown, Matt Britzman, said: "This is a classic attempt to buy the dip for Rio Tinto, snapping up some high-quality lithium assets when spot prices are around 80% down on their highs. It’s a good time to shop for counter-cyclical assets, and this deal helps propel Rio Tinto’s lithium portfolio to new heights, with it already having exposure through its Rincon and Jadar projects."

Furthermore, Britzman hinted that Rio Tinto will have to work hard to ensure that the purchase will be valued by shareholders.

He added: "The price will be scrutinised, at a touch under 20% of where Arcadium was trading when the company was formed in January, it’s not quite a bargain, and investors in the commodity world tend to take a dim view of M&A at the best of times. Arcadium is currently free cash flow negative, due to low prices and high investment in new projects, so Rio Tinto will have some work to do if it wants to turn this into an accretive buy – and that won’t happen immediately."

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