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tommyleesd2003 6 posts  |  Last Activity: Apr 7, 2015 11:53 AM Member since: Dec 29, 2008
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  • Reply to

    The Situation At SQM Worsens

    by abbaman7 Apr 6, 2015 10:05 AM
    tommyleesd2003 tommyleesd2003 Apr 7, 2015 11:53 AM Flag

    I’d be disappointed if POT divested fully from SQM. I don’t exactly know all of the circumstances over at SQM, but they’ve got a very attractive business. I think Chile is going to retain at least a minority interest in SQM all said and done (a 100% acquisition isn’t likely), but I think POT could make a case that it’s in the government’s interest to let POT become a majority owner b/c it’s current structure has destroyed wealth with corruption and tax scandals – POT is a very well-run company and has done a good job creating value for shareholders, that could be shared by Chile. If I were Tilk, that’s how I’d play it but who knows what contingent liabilities are out there with SQM regarding the recent improprieties.

    Regarding a swap between SQM, ICL and POT – even with a major drop in SQM’s market value, POT would have a significant tax liability due on the sale as it’s market value exceeds it’s carrying value on it’s balance sheet by well over $1B. I don’t know the laws (especially internationally), but if POT could contribute it’s ownership in SQM for an increased ownership in ICL in a tax-free manner, it’d save hundreds of millions of dollars in capital gains taxes. US companies have structured deals in such a manner, but it may not be possible internationally. POT would want Board representation on ICL if that were to happen, however, and it’s something they’ve yet to receive.

    I think SQM would be a nice fit for ICL’s chemicals business, so ICL’s interest is not surprising. My preferred approach would be acquiring an additional third of SQM to get majority control of that business (assuming Chile wants to retain ownership which seems to be the policy of their natural resources).

  • tommyleesd2003 tommyleesd2003 Mar 19, 2015 10:47 AM Flag

    That's not how the accounting works. Dividend payments to shareholders don't flow through the income statement and therefore don't reduce taxable income.

  • Reply to

    SQM Situation

    by tommyleesd2003 Mar 18, 2015 10:15 AM
    tommyleesd2003 tommyleesd2003 Mar 18, 2015 12:00 PM Flag

    We shall see. I love this company's assets and at current pricing it's quite attractive, but just two days ago the CEO was pushed out and the Chilean IRS is questioning them, as well. This is a very messy situation. The stock is down 29% today as of now.

    All this seems to be related to political campaign contributions and lowering tax liabilities. There even seems to be the potential for acquiring lithium mining licenses through political bribes.

    If it turns out that POT can be a white knight in all of this, it's a win but I think there's a long way to go before we get to that point.

  • tommyleesd2003 by tommyleesd2003 Mar 18, 2015 10:15 AM Flag

    Interesting development...POT's board representation on SQM has stepped down due to a campaign financing scandal. SQM's stock is tanking this morning. It's a shame. It's an attractive business.

    http://www.reuters.com/article/2015/03/18/chile-scandal-sqm-idUSL2N0WK0NR20150318

  • tommyleesd2003 tommyleesd2003 Mar 10, 2015 5:44 PM Flag

    I was confused as to why this was news. This is nothing new. Mosaic has been doing the K3 expansion at Esterhazy for years now. I suspect it only made the news for political reasons. Canada is on the brink of recession (lots of bad news in Alberta, and Saskatchewan also has a fair amount of oil revenue) and I think it was to boost confidence in the province. Could be wrong.

  • tommyleesd2003 tommyleesd2003 Mar 6, 2015 2:45 PM Flag

    Mosaic made a similar acquisition last year that was under-the-radar, buying some of ADM's distribution network in Brazil. Brazil is an important market for Canpotex and ever since July 2013 there was some worry that Uralkali-Belaruskali would send some of their extra production into Brazil. Brazil's economy has been disappointing and their equity market has sucked, but I think eventually the political regime will change and things will improve. I think the Canadians are trying to lock Brazil's market down, which is particularly important b/c Brazilian potash production is quite mature and I believe declining, though I don't know that for a fact.

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