Morningstar | Chilean Regulators Approve Sale of Nutrien's SQM Stake to Tianqi Lithium; Our Outlook Intact
On Sept. 7, Reuters reported that Chilean antitrust regulators have approved the sale of Nutrien's 24% equity stake in SQM to Tianqi Lithium. Nutrien's minority stake in SQM is the last remaining required divestiture as a regulatory condition of the merger between PotashCorp and Agrium that created Nutrien. Although the transaction must still be granted court approval, we now assign a 100% chance that the deal will close, up from 75%, and we expect the transaction to be completed by the end of the year.In addition to the SQM stake, Nutrien also had to divest minority equity stakes in Israel Chemicals and Arab Potash. Although we increased our assumed probability that the SQM divestiture will close, we continue to estimate that Nutrien will receive roughly $5 billion after taxes and fees from the three equity stake sales. With our outlook unchanged, we maintain our fair value estimates of $65 and CAD 85 per share for narrow-moat Nutrien. Our $55 fair value estimate for narrow-moat SQM is also unchanged.
Once the transaction closes, Tianqi Lithium will be able to name three of SQM's eight board members. As a condition of approval, Tianqi Lithium agreed to not name any of its executives or employees to SQM's board. Chilean regulators required this measure as a means to limit Tianqi's access to commercially sensitive information held by SQM. As we wrote in our May 17 note when the Nutrien-Tianqi transaction was announced, we think Tianqi's ability to influence SQM's actions will be limited. Although SQM may sell lithium to Tianqi's battery business, we would expect transaction prices to be similar to those offered by Albemarle or FMC.
For more information, see our May 17 note, "Nutrien Announces Proposed SQM Equity Stake Sale to Tianqi Lithium."
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.
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