Potash Board Exodus Sinks SQM as Chile Company Fights ProbeMatt Craze and Christopher Donville
Soc. Quimica & Minera de Chile SA shares fell the most in two decades as Potash Corp. of Saskatchewan Inc. withdrew its board members after clashing with controller Julio Ponce over the handling of a tax probe.
SQM plunged as much as 29 percent in Santiago after Potash Corp.’s three directors, including its Chief Financial Officer Wayne Brownlee, resigned from SQM’s board late Tuesday. Their departure, announced by the Santiago-based company in a regulatory filing, follows SQM’s efforts to block an investigation by the public prosecutor’s office triggered by an alleged $15,000 political donation.
The board withdrawal raises questions about Potash Corp.’s strategy for its 32 percent stake in SQM, the world’s largest producer of iodine and lithium and a major potash producer. Chief Executive Officer Jochen Tilk, appointed last year, said in December that he is reviewing the status of minority stakes in fertilizer companies that at the time were valued at $4.5 billion. Potash is yet to complete the review of minority stakes and has no plans to either sell or increase its SQM shareholding, spokesman Randy Burton said by telephone.
The directors resigned as “it has become clear that given our minority and dissident position on the board, we are unable to ensure either than an appropriate investigation is conducted or that SQM collaborate effectively with the public prosecutor,” the Saskatoon, Saskatchewan-based company said in a regulatory filing on Wednesday.
SQM, which also trades in New York, plunged the most since December 1994, losing 17 percent to 11,752 pesos at the close in Santiago, the lowest since October 2008. The value traded of 28 billion pesos ($44 million) was almost six times Tuesday’s value. SQM’s dollar bonds due 2025 lost 2.5 cents to 96.725 cents on the dollar, pushing up yields to 4.8 percent.
Ponce and Potash will elect new board members at the company’s annual general meeting which has yet to be scheduled. SQM filed fourth-quarter results on March 3.
“We think Potash Corp. has been thinking about selling its stakes in SQM and some other minority investments,” Joel Jackson, a Toronto-based analyst at Bank of Montreal’s capital markets unit, said by phone Wednesday. “Some of the questions being asked around SQM might expedite that process.”
Ponce controls SQM through a series of holding companies after building up his stake through state asset sales that former dictator Augusto Pinochet began in 1983. He converted SQM into one of Chile’s most profitable companies and fended off a 2006 attempt by Potash Corp. to gain control by signing a pact with Nagoya, Japan-based Kowa Co.
Potash Corp. scrapped a 2013 bid for Israel Chemicals Ltd. after opposition from politicians and workers, keeping a 14 percent stake. The company also holds stakes in China’s Sinofert Holdings Ltd. and Jordan’s Arab Potash.
Patricio Contesse, who this week was ousted as SQM’s CEO after 25 years, obtained a constitutional tribunal ruling to stop prosecutors from raiding SQM’s offices for at least a week. SQM delivered some company accounts to Chile’s tax office on March 16, declaring that the tax authorities are the competent authority to investigate the case.
The tax office will cooperate with the prosecutor’s investigation, newspaper Diario Financiero said Wednesday, citing an unidentified official.
Chilean prosecutors are investigating whether an alleged payment by SQM to the sister-in-law of Pablo Wagner was used to fund a senatorial election campaign in 2009. Wagner, who went on to become deputy mining minister in 2010, is in custody awaiting trial for charges of receiving bribes as part of a wider case involving the financial group, Penta.
“Once you take away discounts, fees and capital gains taxes we’re not sure that the sale of the minority stake of SQM would be accretive for Potash Corp., unless it can find some creative way to do a transaction,” Jackson said.