Nutrien cashes in with $4.07B sale of lithium stake
In a sign of how hot the lithium market is, Canadian fertilizer producer Nutrien Ltd. has sold a 24-per-cent stake in Sociedad Quimica y Minera de Chile S.A. for US$4.07 billion, at a healthy premium.
The purchaser, China’s Tianqi Lithium Corp., agreed to pay US$65 per share for the Chilean producer, a premium on the US$58 trading price, which surprised some analysts, as antitrust regulators in China and India had required Nutrien — the company formed by the merger of Potash Corp. of Saskatchewan and Agrium Inc. — to sell its stake in SQM as a condition of the deal.
“The price seemed good,” said John Chu, an analyst with Laurentian Bank Securities. “Because Nutrien had given advanced notice that they had to sell it, and because it was such a large block of shares, it was thought that they would have to sell it at a discount, and they actually sold it at a premium.” Nutrien has said it could use proceeds from the deal as part of its US$1.5 billion share buyback, for part of its US$8 billion in debt reduction or for other purposes. In total, Nutrien owns a 32-per-cent stake in SQM. The current sale only relates to its approximately 62.5 million class A shares, representing 24 per cent of SQM. It also owns about 20 million class B shares, representing an additional eight per cent of the company, which it plans to sell by April 2019 to further satisfy antitrust regulators, according to Richard Downey, a spokesman for Nutrien. SQM produces both lithium and potash, and regulators in India and China were concerned about Nutrien’s dominance in the potash market, he said.
Tianqi is a major lithium supplier in China and also has a presence in Australia.
Chile’s former government in March had tried to block the sale of SQM to Chinese buyers over fears it would “give China an unfair advantage in securing strategic resources,” according to Reuters. SQM is the second-largest lithium producer in the world after U.S.-based Albemarle Corp. Downey dismissed reports that Chilean regulators have raised the antitrust concerns. Although the sale of class A shares come with three board seats in SQM, it is just a minority position in the company. He said the company is anticipating regulatory review only from Chinese and Indian regulators related to the potash market.