September 26, 2016 / 2:38 PM / 2 years ago

China's Tianqi Lithium to buy stake in Chile's SQM

SANTIAGO, Sept 26 (Reuters) - China’s Tianqi Lithium said on Monday it has agreed to buy just over 2 percent in SQM , at a time of increasing takeover interest in the Chilean nitrates and lithium company.

Tianqi and SQM are two of the world’s biggest producers of lithium, a key ingredient in rechargeable batteries. Interest in the mineral has surged in recent months on hopes of an electric vehicle boom.

Whereas SQM owns operations in South America’s “lithium triangle,” Tianqi manufactures batteries and has resources assets in China and Canada.

Tianqi will pay $38 per share for 5.5 million SQM Class B shares, at a total cost of around $210 million, with an option to buy more, according to a statement filed by Tianqi to the Shenzhen stock exchange.

SQM’s Santiago-listed B shares and Nasdaq-quoted stock jumped nearly 4 percent to around $26 on Monday.

Tianqi said it is buying the shares from U.S. investor SailingStone, and the transaction will leave it with an overall 2.1 percent stake in SQM.

The deal comes as SQM’s controlling shareholder Julio Ponce is trying to sell a stake of about 23 percent in the company via a holding firm. Tianqi has said it has made a bid for that stake.

Other companies are also believed to have made bids for Ponce’s stake, including China’s Ningbo Shanshan.

Ponce owns a total of 29.97 percent in the once state-run SQM. Since 2006 he has formed a controlling group with Japan’s Kowa, which owns 2.1 percent.

Tianqi’s purchase of a similar-sized stake implies that, if it were to buy Ponce’s entire interest, it would gain control of the company without the need for a deal with Kowa.

Canada’s Potash Corp also owns a 32 percent stake in SQM, but is currently in $26 billion merger talks with Agrium Inc. It is unclear whether it has also been involved in SQM bid talks.

SQM did not immediately respond to requests for comment. (Reporting by Rosalba O’Brien in Santiago; Additional reporting by Meg Shen in Hong Kong; Editing by Jeffrey Benkoe)

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