China’s lithium battery giant Tianqi Lithium Industries Inc. (002466.SZ) offers to acquire a 24 percent stake of Chile lithium maker SQM for about 4.3 billion US dollars, Reuters reported, citing from a person familiar with the matter. The person also said that Tianqi Lithium Industries is seeking to acquire the stake from Canada fertilizer maker Nutrien Ltd.
The company’s secretary of the board responded that the company has noticed the news, and has no further information to tell. As of yesterday’s closing, the Shenzhen-listed company surged 3.02 percent. Its capitalization exceeded 70 billion yuan.
SQM and the acquirer are among the world top four lithium battery manufacturers which accounts for 66 percent of the world’s total lithium carbonate production.
On the closing hours of May 15 local time, the capitalization of SQM was 15 billion yuan. On this basis, if Tianqi Lithium Industries could complete the deal, it will get a premium of about 20 percent.
Tianqi Lithium Industries is mainly engaged in the exploitation of solid lithium resource, production of lithium product and lithium trade. Lithium is a major material for rechargeable battery. As the new energy vehicles have been growing rapidly around the world, Tianqi Lithium Industries saw a continuous growth in performance.
Operating revenues of Tianqi Lithium Industries came at 1.86 billion yuan, 3.9 billion yuan and 5.47 billion yuan during 2015 and 2017, respectively. During the period, its net profits attributed to shareholders registered 247 million yuan, 1.51 billion yuan and 2.14 billion yuan, respectively. Its operating revenues and net profits grew by over 50 percent in the first quarter of this year. Net profits are expected to reach 1.3 billion yuan-1.45 billion yuan in the first half of the year.
Among the listed companies in lithium industry, Jiangxi Ganfeng Lithium Co., Ltd. (002460.SZ) gained 4.838 billion yuan of operating revenues and 1.469 billion yuan of net profits last year. Its total market capitalization was about 53 billion yuan. Sichuan Yahua Industrial Group Co., Ltd. (002497.SZ) saw 2.359 billion yuan of operating revenues and 231 million yuan of net profits. Its total capitalization recorded about 12.5 billion yuan. Tianqi Lithium Industries keeps leading in the amount of operating revenues, capacity and reserves of lithium resource.
Tianqi Lithium Industries indicated in its 2017 annual report that new energy vehicle industry is developing now, which will continue to boost demand for lithium battery and its key materials, including lithium compound and lithium resource in the future.
The prosperous development of China’s new energy vehicle market proves this. According to China Automotive Industry Association, new energy vehicle output and sales both reached nearly 800,000 units in 2017, up by 53.8 percent and 53.3 percent year on year, respectively. Its market share rose to 2.7 percent last year. The association predicted that the electric vehicle sales will be more than 1 million units this year with growth rate at around 40 percent.
However, China Nonferrous Metals Industry Association thought that exploitation of lithium ore resource in China proceeded slowly in recent years and China mainly depended on importing raw material. Even the enterprises which own mining resources in China are no exceptions.
Tianqi Lithium Industries made moves in global expansion earlier with efforts to ensure supply of raw material and globalization of business.
At the end of 2012, it announced it planned to raise no more than 4 billion yuan by issuing stocks through private placement, which would be used to acquire shares of Australian lithium ore manufacturer Talison Lithium Pty Ltd. At present, raw material lithium concentrate that Tianqi Lithium Industries needs are all imported from the Australian manufacturer.
Besides expanding in Australia, it eyed on SQM in 2016. It announced it would acquire 5.5 million B shares of SQM at a price of 38 US dollars per share in September of the year. The deal totally cost it about 210 million yuan. After the deal was done, it had 2.1 percent of shareholdings in SQM.
It intended to further acquire 32 percent of stocks of SQM in April, but Corfo, the institution for economic development in Chili, sued to anti-monopolization regulator to stop the transaction. One month later, the company is said to have acquisition again. It is not clear yet whether this will come true.
Translated by Coral Zhong & Vanessa Chen