Critical Metals Files Scheme Deed as European Lithium's $330 Million Liquidity Clause Comes Under Scrutiny

Critical Metals' proposed takeover of European Lithium requires net cash of A$330M at closing, but a A$24M shortfall and liquidity conditions threaten the deal, which also aims at full control of Greenland's Tanbreez project.

When Critical Metals submitted the Scheme Implementation Deed to the SEC on May 19, 2026, the document laid bare the full mechanics of its proposed takeover of European Lithium — and the single most demanding condition for closing. The contract, signed the previous day, requires European Lithium to hold net cash and liquid assets of at least 330 million Australian dollars at completion. As of March 31, 2026, that figure stood at roughly 306.4 million Australian dollars, leaving a shortfall of nearly $24 million.

The buyer does have some wiggle room. Marketable securities worth around $18 million US dollars could potentially count toward the threshold, depending on their liquidity classification. But until that gap is closed, the entire transaction — structured through two interdependent Australian schemes of arrangement — remains under a cloud that the market has already priced in.

The Fine Print on Consideration and Governance

Under the terms, each European Lithium share will convert into 0.035 new Critical Metals shares, with no vote required from Critical Metals' own shareholders. The consideration will be delivered as CHESS Depositary Interests (CDIs), each representing one Critical Metals share, and will be tradable on the ASX from the first business day after implementation. Shareholders entitled to fewer than 35 CDIs will be cashed out in Australian dollars through a sale agent mechanism.

A series of conditions must be satisfied: a shareholder vote from European Lithium, court approval, regulatory clearances, and an independent expert's report confirming the scheme is in the best interests of security holders. The shareholder meeting is pencilled in for the third quarter of 2026, with completion targeted for the second half of the year.

A Symmetrical Risk: Break Fees and Exclusivity

Both sides face a break fee of 12 million Australian dollars if they walk under specific circumstances. European Lithium must pay if its board withdraws its recommendation, the company terminates for a superior proposal, or a competing bid is announced before the end date and completed within 12 months. Critical Metals owes the fee if it commits a material breach or fails to deliver the agreed consideration. If the scheme becomes effective, all break fees vanish.

The no-shop clause is equally tight. European Lithium cannot actively solicit alternative offers during the exclusivity period. If an unsolicited bid emerges, it must inform Critical Metals within one business day and allow at least four business days to match the proposal before pursuing further negotiations.

The Strategic Prize: Greenland's Tanbreez

Behind the legal framework lies a clear rationale. Critical Metals already holds 92.5 percent of the Tanbreez rare earths project in Greenland; European Lithium contributes the remaining 7.5 percent, giving Critical Metals full ownership. The transaction also simplifies a convoluted cross-shareholding structure in which European Lithium owns roughly 31 percent of Critical Metals. Post-completion, the Nasdaq-listed buyer will have a cleaner profile and fewer interlocking interests.

Market Scepticism Underscores Execution Risk

Investors have not taken the conditions lightly. On May 20, European Lithium shares fell 7.23 percent to A$0.385, well below the implied deal value of roughly A$0.58 per share at launch. The discount reflects the combination of the cash condition, the need for court and regulatory approvals, and the ASX listing of new CDIs. For now, the liquidity threshold serves as the most visible checkpoint on the road to a year-end deadline that expires automatically on December 31, 2026, if the scheme has not gone through.