Analyst: SQM Unhurt by Cosayach Takeover Flop

The collapse of talks between Chile's Inverraz group and industrial minerals producer SQM (NYSE: SQM) over the sale of iodine maker Cosayach is no bad thing for SQM, according to BSCH analyst Jose Ignacio Mujica. SQM announced after the markets closed on October 5 that a preliminary agreement to pay Inverraz US$140mn for Cosayach had fallen through. "We believe that this news does not justify any significant price reaction on SQM's shares. We reiterate our 'hold' rating on the stock," Mujica wrote. The two companies have been involved in a series of legal battles since SQM, then known as Soquimich, was privatized in 1986. Inverraz controller and Chilean senator Francisco Javier Errazuriz said following the sell-off several of his properties appeared registered as belonging to Soquimich. Mujica said Cosayach, which started producing iodine in December, has capacity of 2,340tpy, which would represent 12% of the world market. SQM already has 30% of the global iodine market. "However, we believe that the potential of SQM to remain as a leading player in the iodine business is still quite high without these assets. If market conditions were favorable, the company could increase its production to as high as 8,000tpy," he wrote. His target price for SQM is US$25.50. It fell Monday morning, but closed up 4.5% on Wall Street on Thursday to end the day at US$17.03. The talks with Inverraz collapsed because of the complexities involved in completing due diligence on Cosayach's 1,500 properties, according to Santiago daily El Mercurio.