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Understanding PotashCorp’s Ownership in SQM

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Conditional approval

As we discussed in the preceding part of this series, Potash Corporation of Saskatchewan (POT), also known as PotashCorp, and Agrium (AGU) have to divest their investments (MOO) in some of their minority interests in order for their merger to be approved in China and India.

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SQM’s ownership

PotashCorp owns about 32% of Sociedad Quimica y Minera de Chile (SQM), one of the largest lithium producers in the world. Lately, lithium has gained increased attention due to its use in batteries to store energy. The electric car sector, dominated by companies like Tesla (TSLA), has thus seen an increasing demand for lithium.

In its recent 3Q17 earnings presentation, SQM provided forecasts for demand growth of lithium products based on the growth of electric vehicles. In one of the scenarios, the company expects lithium demand to double every five years.

Buyers for SQM

With such growing demand for lithium, there’s been strong interest from related parties in gaining access to lithium resources through SQM. Since China has become a dominant player in several industries over the years, it’s also expected to gain access to SQM’s resources.

According to Reuters, Chinese private equity firm GSR Capital was interested in acquiring a ~20% stake in the company. However, it remains unclear which of the owners in SQM was interested in selling to GSR Capital.

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