Chinese lithium products manufacturing firm Tianqi Lithium has reached an agreement to acquire a 25% stake in Chile-based lithium company Sociedad Química y Minera de Chile (SQM) for a cash consideration of $4.07bn.
Under the terms of the deal, Tianqi Lithium will buy 62,556,568 ‘A shares’ of SQM from Canadian fertiliser company Nutrien in exchange for $65 per share in cash.
The transaction involves the acquisition of all of Nutrien’s ‘A shares’ in the Chilean firm, which is engaged in the production and distribution of lithium, iodine, specialty plant nutrients, potassium-related fertilisers and industrial chemicals.
“With growing free cash flow, combined with the significant proceeds from this sale, Nutrien further enhances our balance sheet and liquidity.”
Nutrien president and CEO Chuck Magro said: “The announced sale of the majority of our SQM holdings marks another key integration milestone for Nutrien.
“With growing free cash flow, combined with the significant proceeds from this sale, Nutrien further enhances our balance sheet and liquidity, and places us in a strong position to execute on our capital allocation priorities.”
The sale is part of a regulatory requirement, mandated by the Competition Commission of India and Ministry of Commerce in China, for the approval of the merger of Agrium and PotashCorp, which resulted in the formation of Nutrien.
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Even after the divestment of the ‘A shares’, Nutrien will continue to hold 20,166,319 SQM ‘B shares’, which will be sold at a later date.
Tianqi Lithium president Vivian Wu said: “This is an attractive investment for Tianqi Lithium, which fits well within our existing business strategy.
“Tianqi Lithium’s shareholders will greatly benefit from this transaction given SQM’s long-term stable financial returns and steady dividends.”
Scheduled to be completed by the fourth quarter of this year, the transaction is conditional on closing conditions, including regulatory approvals and Tianqi Lithium shareholder approval.
Besides lithium resource development and exploitation, Tianqi Lithium is engaged in downstream production processing, as well as the trading of lithium products, including mineral concentrates.
Demand for lithium is growing as more automotive companies are shifting their focus to increased manufacturing of electric vehicles to curb pollution from conventional fuels.
