Chilean Court Backs Tianqi Purchase of Minority Stake in Lithium Producer SQM

Tianqi Lithium Corp., China’s largest lithium producer, received the green light from Chile’s competition court to acquire a 24% stake in its main Chilean peer, Sociedad Quimica Y Minera (SQM).

The competition court announced it had approved the deal because Tianqi’s proposed measures to prevent it from exerting excessive influence over its rival were “sufficient and proportional enough to reduce risks,” it said in a statement on Thursday (link in Spanish).

Under the terms of the deal, Tianqi agreed not to appoint any directors to SQM’s board and promised not to disclose any of the company’s confidential information. Tianqi expects the deal to close before the end of the year, Reuters reported.

However, SQM had asked the court to reject the deal on the grounds that it did not provide it sufficient safeguards. It is now reviewing the resolution “to define the next steps,” it said in a statement also published on Thursday.

Chengdu-based Tianqi announced in May the $4.1 billion deal to purchase a stake in the world’s second largest producer of lithium, a key ingredient in car batteries. Yet the deal was held up by an investigation by antitrust regulator FNE, after Corfo, the nation’s development agency, raised concerns about the deal’s potential to distort the market for lithium.

However, last month Tianqi won the approval of FNE with its plan to limit its influence on SQM. Thursday’s competition court ruling gives the deal high level approval. Commenting last month, Chile’s National Economic Prosecutor Mario Ybar said that the agreement “marks a milestone, because for the first time procedures are being established for a company’s acquisition of a minority interest in a competitor.”

The Chilean giant has “ambitious plans for expanding its production in Chile,” with demand for lithium only set to rise, Alice Yu, a senior consultant with CRU, previously told Caixin. The purchase will give Tianqi greater access to the element and boost China’s presence in the electric-car-battery supply chain.

Though China has major lithium supplies, they are mostly in the form of lithium brine in remote salt flats, posing technical challenges to large-scale extraction compared with the more-accessible hard-rock form. This, along with environmental concerns, means that the country imports most of the lithium used in its electric-car industry.

Contact reporter Ke Dawei (daweike@caixin.com)