Ann: Binding Transaction Implementation Deed with SQM, page-342

It was a very interesting discussion on MMs with their special guest on M&A and importantly clarified the situation and made me ponder what action I may take with my holding

This is my summary understanding of the situation (please correct me if I am wrong as I want to know). The situation looks like a game of chess.

1. Let’s assume Gina is buying and continues until she reaches 19.0%, say tomorrow.
2. Once she achieves 19% then SQM’s scheme of arrangement is dead and it is my understanding that SQM are legally bound to stand in the market and buy AZS shares at $3.50 but cannot pay any more or pay any lower. That is SQM will continue to buy shares at $3.50 as they have no minimum or importantly no maximum target percentage ownership they are committed to. But I believe SQM would most likely want a minimum holding of 50.1% to take control
3. So unless another bidder comes out with a higher bid price than $3.50 then SQM will keep buying AZS shares at $3.50. Hence the SP should stay around $3.50 until there is a further development.
4. When Gina reaches 19.9% (tomorrow?) she cannot legally buy any more AZS shares unless she launches a formal takeover offer probably at a higher price.
5. The risk for Gina is if she does not come out with a higher bid then SQM will continue to mop up shares at $3.50 and if SQM achieves 50.1% they will have effective control of Azure with Gina on 19.9% and maybe Creasy on 13% making a total of 83%- I assume the Germans will sell but if not then 93% of shares will be tied up. So Gina under this scenario will end up with a minority holding of 19.9%
6. Even if Gina stops buying and stays at 15.4%, which needs to be validated, she and Creasy can stop SQM from achieving 75% under the scheme of arrangement and AZS will stay listed - maybe Gina will stop at 18.9% but this will not change this scenario
6. Unless both Creasy and Gina sell to SQM they will not be able to get to 90% and so cannot compulsory acquire the remaining shares under the $3.50 takeover offer. Under this scenario AZS will continue to be listed and shareholders will continue to participate in any future upside or until there is a higher bid.
7. SQM may be happy with a 50.1% holding and if Gina does not make a higher bid then AZS will continue to be listed.

No one knows Gina’s motivation or strategy WRT to AZS.

Ii seems to me that the SP will probably remain around $3.50 if Gina gets to 19.9% until there is some new development which could either be a higher bid from Gina, and who knows when and if that occurs, or SQM stops buying at $3.50 (who knows when that will occur).

If Gina stops buying at 18.9% or even 15.4% will the SP stay around the $3.50 mark? SQM will still have an active scheme of arrangement to buy at $3.52 but will be stopped from achieving 75% unless Creasy sells but Gina can then go to 19.9% effectively blocking the $3.52 scheme of arrangement on her own (the Germans have stated they will accept the $3.50 offer).

Can we rule out SQM eventually increasing the bid at some stage down the track? I think not.

Can we rule out Gina coming out with a higher bid? Again I think not.?

The situation reminds me of the takeover of Darcian by GMD and also of bullseye by EMR (both in the last year) where the initial takeover was not successful with a number of larger shareholders holding out for a much higher price (eg double in one case) after a year or so. Could this happen to AZS?

My logic if it holds up, suggests there is no hurry to sell. SQM are obviously extremely keen to buy AZS so I feel the situation is very different to LTR.

How much downside risk is there really is the AZS SP from the $3.50 level

Lastly I am intrigued with over 18% of SOI traded today, if Creasy or the Germans sold any shares and if not who has been selling. While I do not know I speculate neither sold a single share but I maybe dead wrong.