Daily Brief Energy/Materials: Allkem Ltd, Electrovaya, Pan United Corp, Texas Pacific Land , TerraVest Industries, Ecovyst, Treatt PLC and more

• Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US). 
• At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
• The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.

• Allkem Ltd (AKE AU) and Livent (LTHM US) are combining in an all-stock merger of equals to create a global lithium chemicals producer.
• Allkem Ltd (AKE AU) shareholders will receive 1 NewCo share for each Allkem share held while Livent (LTHM US) shareholders will receive 2.406 NewCo shares for each Livent share held.
• The merger will have implications for the stocks in the MSCI, S&P/ASX, thematic, and other global indices at the time of implementation.

• Allkem Ltd (AKE AU) and Livent (LTHM US) announced a merger of equals. AKE shareholders receive 1 NewCo share per AKE share, LTHM shareholders get 2.406 NewCo shares per LTHM share.
• The transaction is expected to close by the end of calendar year 2023 subject to shareholder (AKM and LTHM) and regulatory approvals. 
• The merger is sensible as NewCo will have scale, synergies and capital efficiency. AKE shareholders benefit from an attractive merger ratio and potential rerating from a US listing. 

• In 2QFY23, Electrovaya achieved record revenue of $10.5 million, a 144% Y/Y increase from $4.3 million in 2QFY22.
• The increase in revenue was due to increased order volume and ramp-up in production to meet the demand, despite ongoing supply chain issues and inflationary pressures.
• Revenue was predominantly from the sale of batteries for Materials Handling Electric Vehicles (MHEVs), which accounted for $10.2 million (~97%) in 2QFY23, versus $3.9 million (~90%) in 2QFY22.

• kopi-C with Pan United’s Group Head of Corporate Development: “We are decarbonising the world with concrete” Jim Teh, Group Head of Corporate Development of Pan United, believes in fighting climate change by innovating in its concrete products.
• Pan-United Corporation Ltd (Pan-United) is a listed Asia-based technology company (SGX:P52) catalysing change in the ready-mix concrete and logistics space.

• TPL reported first quarter results that included a larger than normal legal expense crippling the Company’s net income in the period
• TPL is disputing with its largest shareholder as to the voting agreement they have in place with them 
• Increase in non-oil and gas royalty revenue during a seasonally soft quarter leads us to expect outperformance over the next two quarters.

• Consolidated revenue in Q2 FY2023 increased by 28% including 20% organic revenue growth.

• Growth was driven by bouyant demand from oil & gas customers both the Processing Equipment and Service segments.

• Compressed Gas segment also performed well with 32% revenue growth during the quarter. 

• ECVT reported first quarter results depressed from the effects of a winter storm and a facility turnaround
• ECVT is maintaining the adjusted EBITDA and free cash flow guidance provided with fourth quarter 2022 results
• The biggest adjustment we are making to our earnings model is the reduction in sales due to deflation of pass-through costs

Treatt’s H123 results demonstrate that the business is back to greater stability and resilience. The growth was particularly impressive in Citrus, Coffee and China, and management is quietly confident about the rest of the year. We continue to believe that risk lies to the upside in terms of market expectations. Growth in H1 was driven by price increases, which offset inflationary pressures and supported margins. Cost control and efficiency measures are ongoing, and cash flow was strong, as highlighted in the recent trading update, with improved net debt despite the traditional build of working capital at H1.