Battery recycler Li-Cycle Corp. is raising cash for global expansion by going public on the New York Stock Exchange in a deal that values the Mississauga-based company at US$1.7-billion.
Li-Cycle repurposes worn out lithium batteries in everything from iPhones to Teslas using a patented process with low environmental impact. The five-year-old private company announced plans on Tuesday to merge with Peridot Acquisition Corp., an NYSE-listed special acquisition corporation (SPAC). If approved by shareholders in both companies, the transaction will inject US$615-million into Li-Cycle, which counts 14 electric vehicle battery manufacturers among its 40 clients.
Li-Cycle currently has facilities in Kingston, Ont., and Rochester, N.Y. In the next five years, it plans to open three more recycling hubs and up to 20 spokes that collect and initially process spent batteries, with operations in North America, Europe and Asia.
The company expects to spend more than US$900-million through 2025 as it increases capacity more than tenfold. Co-founder and chief executive Ajay Kochhar said electric vehicle production is growing so quickly, Li-Cycle is currently working flat out to recycle scraps and rejected batteries from manufacturers.
“Our electric vehicle customers are scaling up their operations, and they kept asking the question ‘How can we be comfortable that you can scale up with us?’” Mr. Kochhar said.
He said the proposed SPAC deal provides Li-Cycle with enough cash in one transaction to fund expansion, which helps the company lock down long-term contracts with customers.
“There is a speed and efficiency to the SPAC, in contrast to trying to take multiple bites of the apple by going public, then continuing to raise capital,” Mr. Kochhar said.
He added that listing on the NYSE also allows Li-Cycle to consider acquisitions as it expands. In a presentation, Li-Cycle said it expects to generate earnings before interest, taxes, depreciation and amortization (EBITDA) of US$109-million in 2023, rising to more than US$500-million by 2025.
SPACs are an increasingly common way for companies to raise money and go public on U.S. markets. Houston-based Carnelian Energy Capital launched the Peridot SPAC last September. Carnelian chief executive Alan Levande will join the Li-Cycle board if the deal closes. He is a former investment banker at Goldman Sachs & Co. LLC.
Last year, 248 U.S. SPACS raised US$83-billion for acquisitions, according to database SPAC Insider. In November, Quebec-based electric car maker Lion Electric Co. went public on the NYSE in a SPAC transaction that raised US$500-million for the company, and valued the business at US1.9-billion.
As part of the SPAC deal, Li-Cycle is raising US$315-million from institutional investors, including Neuberger Berman Funds, Franklin Templeton and Mubadala Capital. Li-Cycle was founded by a pair of engineers – Mr. Kochhar and chairman Tim Johnston – who decided to build a battery recycling business after working with lithium producers while at consulting firm Hatch Ltd.
The two executives will retain their roles in Li-Cycle, and the public company will keep the name. The SPAC transaction is expected to close by the end of June. It will see current Li-Cycle shareholders retain 58 per cent of the business, while SPAC shareholders will take an 18-per-cent stake, institutional backers will hold 19 per cent and Peridot’s founders will own 5 per cent.
Li-Cycle’s chemistry-based approach to recycling batteries captures almost all the lithium, nickel and cobalt and reintroduces those elements into the supply chain. In contrast, many competitors heat batteries to break them down, which sends a significant chunk of the components up the chimney or into landfills.
This year, Li-Cycle estimates the total value of the products generated from recycling lithium batteries, globally, will be US$2.7-billion, with half the supply coming from consumer electronics. By 2025, the company projects reclaiming old batteries will generate US$7.5-billion of material, with 68 per cent of the supply coming from manufacturers’ scrap and just 5 per cent from consumer electronics.
In jurisdictions such as California and China, government regulations mandate that lithium batteries be completely recycled. Ontario will require that 70 per cent of batteries be reused by 2023.
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