PotashCorp May Sell SQM Interest

Antitrust regulators in India and China say PotashCorp must divest certain offshore minority ownership interests in order to merge with Agrium.

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As PotashCorp (TSX:POT,NYSE:POT) prepares to close its highly anticipated merger with Agrium (TSX:AGU,NYSE:AGU) it may have to sell its stake in lithium player SQM (NYSE:SQM).

The merger is being evaluated by antitrust regulators in several countries, and the Canadian Competition Bureau granted unconditional regulatory approval for the merger earlier this week. Brazil and Russia have also granted unconditional clearance.

However, China’s Ministry of Commerce and the Competition Commission of India are conditioning their approval on PotashCorp’s divestment of certain offshore minority ownership interests. In March, the Competition Commission of India commented that the proposed merger, “is likely to have an appreciable adverse effect on competition.” The US Federal Trade Commission has yet to release its decision on the merger.

PotashCorp has a 32-percent interest in Chilean firm SQM, and holds three out of eight director positions on the company’s board, according to local paper Diario Financiero. The company also has a 14-percent interest in Israel Chemicals (NYSE:ICL), along with a 28-percent stake in Arab Potash Company and a 22-percent interest in China’s Sinofert (HKEX:0297).

Chinese private equity firm GSR Capital is reportedly interested in gaining stake in SQM. In July, Reuters said GSR was considering purchasing a 20-percent interest in SQM worth about $1.9 billion. The attraction appears to be SQM’s lithium projects. The metal can be used in the production of electric car batteries, and many countries, including China, are growing increasingly interested in these vehicles.

Merger expected to proceed despite delays

The new company formed by the merger of PotashCorp and Agrium will be called Nutrien, and the transaction is expected to close by the end of the fourth quarter of 2017. The merger was originally expected to be completed in the third quarter of 2017, but was delayed due to trade issues. The two companies said they are working with Canadian Competition Bureau and the US Federal Trade Commission to sort out issues regarding superphosphoric and nitric acid.

Nutrien is expected to be worth $36 billion, and will be the largest producer of potash in the world. It will be the second-largest producer of nitrogen fertilizer, with operations in 18 countries and over 20,000 employees worldwide.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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