Morningstar | Chilean Court Dismisses Lawsuit, Clearing the Way for Nutrien to Sell SQM Stake to Tianqi
On Oct. 25, a five-panel judge in the Chilean Constitutional Court dismissed a lawsuit filed by SQM's largest shareholder, Julio Ponce. The lawsuit was intended to block the sale of a 24% equity stake in SQM from Nutrien to Tianqi Lithium. The court ruled unanimously 5-0 to uphold the Chilean antitrust regulator's decision to approve the sale. With this ruling, the deal is allowed to proceed and we expect it to close by the end of the year. Our fair value estimates for SQM and Nutrien already assumed the sale would go through. As such, we maintain our USD 65 and CAD 85 per share fair value estimates for narrow-moat Nutrien and our USD 65 per share for narrow-moat SQM.Once the deal is closed, there will no longer be uncertainty as to who will control Nutrien's three board seats. This question has recently weighed on SQM shares. We now expect SQM to trade more closely in line with market expectations for lithium and fertilizer prices going forward.
At the closing price of $41.67 per share on Oct. 25, SQM trades at a 36% discount to our $65 per share fair value estimate, firmly in 4-star territory. We continue to think the market is overly bearish on the trajectory of long-term lithium prices. Our $12,000 per metric ton forecast, in 2018 real terms, remains intact.
For more information on our outlook for the deal, see our Sept. 10 note "Chilean Regulators Approve Sale of Nutrien's SQM Stake to Tianqi Lithium; Our Outlook Intact."
Nutrien Ltd is Canada-based crop nutrient producer and distributer of potash, nitrogen and phosphate products for agricultural, industrial and feed customers worldwide. The Company is focused on retail, potash, nitrogen and phosphate mining and processing operations. The Company's retail operations serve growers in a number of countries across the United States, Canada, South Africa, Australia and South America. The Company operates six potash mines in Saskatchewan and has a mine in New Brunswick in care-and-maintenance mode. The Company operates integrated phosphate mining and processing facilities, as well as a number of smaller upgrading plants in the United States.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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