European Lithium's Merger Arbitrage Trades Well Below Its Sum-of-the-Parts

A near-busted merger with Critical Metals Corp leaves European Lithium trading well below its cash-backed standalone value, with multiple favourable outcomes possible.

21 Jul 2026 · 3 min read

European Lithium became the subject of an all-scrip merger arbitrage play after agreeing to combine with Critical Metals Corp on the Nasdaq, with fund managers arguing the deal's implied value, backed by around A$306 million in cash and stakes in Critical Metals and the Tanbreez rare earth project, offers a favourable payoff regardless of whether the original terms hold, improve, or attract a competing bidder.

A cash-backed merger with genuine asset value

Phoenix Growth Fund said it initially bought into European Lithium a few months earlier due to its strong cash backing, before EUR and Critical Metals Corp, listed on the Nasdaq as CRML, announced plans to merge in April, with EUR's main assets comprising a 34 percent stake in Critical Metals, a 7.5 percent interest in the Tanbreez rare earth project in Greenland, and around A$306 million in cash. Tony Sage chairs both companies, and under the merger terms, EUR shareholders would receive 0.035 CRML shares for each share held, with a binding agreement later signed.

EUR's main assets are a 34% stake in Critical Metals, a 7.5% interest in the Tanbreez rare earth project in Greenland and around A$306 million in cash. Tony Sage chairs both companies and under the merger terms, EUR shareholders will receive 0.035 CRML shares for each share held.

— Phoenix Growth Fund, Monthly Report, April 2026

A merger arbitrage opportunity with multiple favourable outcomes

Raper Capital said this position is a bit more speculative than it normally plays, holding a medium-sized stake, believing there is a pretty decent likelihood the original deal gets bumped, or a third party emerges, but even if not there is a lot of value here, with the stock at 42 cents against a current deal value of 61 cents referencing CRML, albeit with a lot of volatility in the CRML price, arguing the fundamental value of EUR is very cheap referencing CRML's current price, and given the Scheme of Arrangement structure, the company will have to justify the terms.

I think there's a pretty decent likelihood the original deal gets bumped (or you see a third party) — but even if not there is a lot of juice here. Stock is 42c, current deal value is 61c (ref CRML) but a lot of hair/vol on CRML price.

— Raper Capital, Post, May 2026

A near-busted merger trading below sum-of-the-parts

Raper Capital summarised the thesis as European Lithium being a near-busted merger trading not far from cash backing, where it believes it gets paid in most all states of the world, with the announced all-scrip acquisition by Critical Metals Corp, struck at an implied 58 cents per EUR share back in April, now worth only around 32 cents per share at current CRML prices, versus a standalone sum-of-the-parts value in the mid to high 40 cents per share, of which a good chunk, around 18 cents per share, is hard net cash, with no independent expert report yet issued.

What fund managers say they are watching next is whether the original merger terms with Critical Metals Corp get renegotiated or bumped, whether a competing third-party bidder emerges, delivery of the independent expert's report on the Scheme of Arrangement, and whether the stock's sum-of-the-parts value in the mid to high 40 cents closes the gap to its current trading price.