October 26, 2018 / 7:37 PM / 19 days ago

UPDATE 1-Lithium miner SQM shares up but risks to Tianqi deal linger

(Adds context on court decision, details on remaining legal options)

By Dave Sherwood

SANTIAGO, Oct 26 (Reuters) - Shares of Chile’s SQM rose as much as 2.7 percent on Friday, a day after the country’s Constitutional Court rejected a lawsuit to block Tianqi Lithium Corp’s $4.1 billion offer to buy a stake in SQM, the world’s No. 2 lithium producer.

The lawsuit, brought by SQM majority shareholder Julio Ponce Lerou, was meant to scuttle an agreement struck between Chile’s antitrust regulators and China-based miner Tianqi. Ponce’s lawyers argued the deal had been struck “practically in secret” and failed to follow due process.

But even as shareholders celebrated the court’s rejection of those arguments, which had left the nearly one-quarter SQM stake sale in legal limbo, options remain for Ponce to derail the agreement.

SQM and its majority shareholder, the Ponce-controlled Pampa Group, earlier this month asked the antitrust court to reverse its decision, saying it would not protect the companies’ secrets from top competitor Tianqi.

Conadecus, a Chilean consumer watchdog, also appealed the decision, saying the deal could raise prices of products powered, in part, by lithium, like cellphones and electric vehicles.

Francisco Aguero, a former director of the University of Chile’s Center on Regulation and Competition, said the five-member antitrust court is unlikely to overturn its unanimous decision.

A spokeswoman for the antitrust court said there is no timeline for deciding such cases. The appeals are confidential until resolved, she said.

“The problem is that the court has already heard their arguments. So now they have to come up with even better arguments,” he said.

If such an appeal were unsuccessful, yet another appeal could potentially go as far as Chile’s Supreme Court, said Aguero.

“But I don’t see much space for that,” he said.

The timing of further legal maneuvering is critical. Canadian fertilizer producer Nutrien, which owns the stake in question, must sell its shares in SQM by April 2019 in order to comply with regulatory requirements put in place by Indian and Chinese authorities following a prior merger.

It has also signed a deal to sell its shares to Tianqi by Dec. 13, 2018.

SQM’s B-series shares touched 29,400 pesos ($42.55) in morning trading on Santiago’s Stock Exchange .

$1 = 690.7 Chilean pesos Reporting by Dave Sherwood Editing by Chizu Nomiyama

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