..well, FIRB's decision, one way or the other, would reflect the level of paranoia we have about China. Tianqi only has a 20% equity in SQM, but nonetheless deemed to be of significant influence enough.
...but the question is why AZS holders did not sell at $3.65 between mid Dec 23 to late March 24 when it was already trading at the TO price? Typically, prices would trade at about 5-10% discount to the Takeover price to cater for prospect that the deal would not go through. It was until early this week that the market decided that a discount would be appropriate.
...its because holders are hopeful that the deal won't go through and the price would shoot upwards in the long term. AZS may well be worth $7 in the long run but if the deal fails, a 50% crash could be in the offing, and holders could easily buy them back after selling first. Just like what long term LTR holders failed to do and now regret, opting instead to spruik their forum to keep dangling another takeover prospect that was never going to happen. AZS share price would need to revert to the mean to reflect the more adverse business condition that the lithium industry currently faces and align with its peers in terms of downdraft. FIRB questions linger in Azure Minerals takeover Sarah Thompson, Kanika Sood and Emma Rapaport
Apr 10, 2024 – 12.56pm
UBS’ Sujit Dey sure knows how to move markets.
In a pre-market note issued to clients on Monday, the hedge fund sales trader said delays in the $1.7 billion Azure Minerals-Sociedad Quimica y Minera/Hancock Prospecting takeover receiving necessary Foreign Investment Review Board approvals should give investors cause for concern.
He added that if the deal breaks, the downside risk could be “huge”, telling disciples that in his view, “FIRB risks have increased”.
“I know we have seen recent examples of FIRB delays but neither of those examples included the Chinese,” he said. “Estia Health’s FIRB delay could have been due to the analysis of PE deal tax leakage and Lithium Power International was a lithium asset going to a state-owned entity.”
Dey continued: “In AZS’ situation, the Chinese ownership of SQM is probably holding up the decision. If it was straightforward, the approval would have come through by now, in my view.”
Azure Mineral’s shares dropped 7.4 per cent in the first hour of trade on Monday and fell by 9.5 per cent by midday. Shares ended the day down 7.8 per cent to $3.29 despite an address from the chairperson assuring investors that things are on track and shareholders backing the deal.
How does Dey figure Chinese ownership? A cursory look at SQM’s shareholders shows Chilean billionaire Julio Ponce Lerou has a stronghold on the company’s shares and its board with more than 50 per cent of the series A shares. However, Dey pointed to China’s Tianqi Lithium’s major shareholding at the Chilean bidder, saying “the Chinese don’t have control but have significant influence over SQM”.
Azure Minerals announced on April 3 that FIRB had requested – and agreed by bid acquisition vehicle SH Mining – an extension to the statutory decline to approve the transaction to April 30. In his address on Monday, chairman Brian Thomas characterised the request as “standard”, adding that Azure is “not aware of any reason that the required FIRB approval will not be received”.
While you can never be sure where FIRB is going to land, some who spoke to Street Talk sought to play down Dey’s wild claims, sticking with management’s assessment and branding FIRB concerns as overblown.
Whichever way it goes, there’s a lot of money on the line and markets are understandably jumpy. The stock last traded 0.6 per cent higher at $3.47 on Wednesday.
