PRESS RELEASE

National Economic Prosecutor's Office reaches agreement with Tianqi on SQM stake acquisition

By
Sunday, September 9, 2018

This press release by the National Economic Prosecutor's Office was published in English using an automated translation system.

The National Economic Prosecutor's Office (FNE) and Tianqi Lithium Corporation (Tianqi) presented on August 27 before the Court of Defense of Free Competition (TDLC) an extrajudicial agreement in which this Chinese capital company dedicated to exploration, exploitation and refinement of lithium and its derivatives, adopted a series of commitments aimed at mitigating the expected effects on free competition in the event of the acquisition of 24% of the property of SQM, the main producer of lithium in Chile.

Start your 15 day free trial now!

cta-arrow

Already a subscriber? Please, login

The TDLC summoned a hearing for Thursday, September 13, in which you can hear the allegations of Tianqi and the FNE, as well as the opinion of those with a legitimate interest. Subsequently, the Court has a maximum period of fifteen working days to approve or reject the agreement, which expires on Thursday, October 4.

The FNE investigated this operation for almost six months, following a complaint by the Production Development Corporation (Corfo) and Senator Alejandro Guillier, which was later joined by another complaint made by Senator Manuel José Ossandón.

By legal mandate, the investigation of the FNE sought to determine the effects of the acquisition in the lithium market, exclusively from the point of view of free competition, without considering other matters of public and economic interest of a different nature.

In order to characterize the market and determine the effects of the operation, the FNE carried out various procedures, including contacts with the competition agencies of the United States, Canada and Australia. In addition, it issued more than 60 offices intended both to take statements, as well as to request background information from various actors in the lithium industry, customers and the parties involved.

At the end of the investigation, the Prosecutor's Office concluded that the acquisition of shares in SQM by Tianqi could generate anti-competitive effects. This purchase, added to the titles of the B series of SQM that Tianqi already owns in the Chilean firm, would leave it with 25.86% of the property, which would allow it to appoint 3 of the 8 directors of the firm.

Once the FNE informed Tianqi of the identified risks, this company, notwithstanding not fully sharing those risks, offered the Attorney General a series of measures that were discussed until they reached those contained in the Agreement, which, in the opinion of The FNE, "effectively tend to sufficiently caution free competition in the lithium industry in the post-Acquisition scenario" , as stated in the Agreement.

The National Economic Prosecutor (S), Mario Ybar, noted that " this extrajudicial agreement, whose content we are submitting to the approval of H. TDLC, marks a milestone, because for the first time measures are established in relation to the acquisition of minority interests by a company with respect to a competitor ".

He added that "behind this agreement there is a deep investigation, which allowed us to detect the possible competitive risks that this operation implies for the country and to establish measures that take charge of an effective and proportional way of said risks, preventing the flow of information between Tianqi and SQM ".

Measures

The main risks identified by the FNE are related to possible coordinated effects associated with the flow of information between competing economic agents. Due to the above, the agreed measures to maintain competitive market conditions and mitigate any risks identified in the operation have as a fundamental principle the limitation of access to commercially sensitive information of SQM by Tianqi, through the Board of Directors of the first , and consist of:

  1. Tianqi will not choose directors, executives or employees of its company to be part of the SQM Board.
  2. Tianqi and its directors will not influence or intervene for the benefit of Tianqi and prejudice the interests of SQM.
  3. The directors of Tianqi will not participate nor will they be part of committees, the administration or decision-making bodies related to the lithium in SQM, unless nominated by independent directors.
  4. The directors of Tianqi will not integrate the board of directors, committees, management or decision-making bodies related to lithium in companies controlled by SQM, unless nominated by independent directors.
  5. Tianqi will inform the FNE of any agreement in the lithium market, with Albemarle and / or SQM, prior to its conclusion.
  6. Tianqi will notify the FNE of any event from which it acquires control or decisive influence in SQM.
  7. Tianqi will disassociate any director, relevant executive or employee appointed by third parties, who assumes a position from those mentioned in SQM.
  8. Tianqi will not request access to commercially sensitive information from SQM.
  9. The directors of Tianqi will not disclose commercially sensitive information of SQM.
  10. Directors will personally bind themselves to the obligations assumed by Tianqi with the FNE.
  11. Tianqi will report to the FNE the appointments and periodic compliance with its obligations.

The Agreement and the proposed measures will be submitted to the approval of the TDLC and the operation can only be implemented if the Court approves them, according to one of the commitments adopted by Tianqi before the FNE.