The best performer on the ASX 200 index in October by some distance was an ASX lithium stock.

With a gain of 94%, Arcadium Lithium (ASX: LTM) shares left others in their wake.

Why did this ASX lithium stock almost double in value?

The catalyst for this gain was news that it has agreed to be acquired by mining giant Rio Tinto Ltd (ASX: RIO) in a blockbuster US$6.7 billion (A$10 billion) deal.

The ASX lithium stock accepted an all-cash transaction for US$5.85 per share (A$8.71 per share), which was a 90% premium to where Arcadium Lithium's shares were trading prior to the news leaking to the market.

Rio Tinto notes that the deal will bring the lithium miner's world-class, complementary lithium business into its portfolio, which establishes it as a global leader in energy transition commodities – from aluminium and copper to high-grade iron ore and lithium.

Commenting on the deal, Rio Tinto's CEO, Jakob Stausholm, said:

Acquiring Arcadium Lithium 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 Lithium is an outstanding business today and we will bring our scale, development capabilities and financial strength to realise the full potential of its Tier 1 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.

Why accept the deal?

The ASX lithium stock's chair, Peter Coleman, believes the deal is in the best interests of its shareholders. He said:

While we remain very optimistic about the long-term outlook for lithium as the energy transition continues, we believe the all-cash premium offer made by Rio Tinto is a full and fair one for our shareholders. We arrived at this conclusion after conducting a comprehensive evaluation of Rio Tinto's proposed transaction. The immediate and substantial cash offer provides shareholders with certainty and liquidity, allowing shareholders to realize the full value of our investment without the ongoing risks associated with potential future market fluctuations.

Developing and expanding lithium production involves significant capital investment, construction challenges, regulatory hurdles and market risks, including unprecedented price volatility driven by changing global supply and demand dynamics. By accepting this proposed transaction from a larger, more diversified player, shareholders can avoid these risks as well as potential delays or setbacks in project execution, in exchange for immediate returns. And our other stakeholders get access to significant backing from Rio Tinto, a company renowned for its size, capabilities and global presence.

Though, it is worth noting that the deal is not complete. It still needs approval from shareholders, customary regulatory approvals, and other closing conditions.