By Micah Maidenberg
A top Chilean court decided not to hear a lawsuit that sought to block a Chinese lithium producer from acquiring a stake in its larger rival, clearing the way for the biggest-ever deal in an industry that supplies the burgeoning electric-vehicle market.
The Constitutional Court of Chile on Thursday declared a suit brought by companies controlled by billionaire Chilean businessman Julio Ponce Lerou inadmissible. Mr. Ponce's companies had challenged the process a competition regulator in the South American country used to sign off on Tianqi Lithium Corp.'s planned acquisition of a 24% stake in Chile's flagship lithium producer, Sociedad Química y Minera de Chile S.A., or SQM.
Tianqi agreed in May to buy the stake for about $4.1 billion from Nutrien Ltd. An attorney representing Mr. Ponce's companies didn't immediately respond to a request for comment.
The closely watched deal will draw the companies that produce the bulk of the world's lithium supply closer, raising fears among some critics that the industry may morph into an Organization of the Petroleum Exporting Countries-like cartel.
Should Tianqi complete the deal as expected, it will become the second-largest shareholder in SQM, the second-largest lithium producer by volume in the world. Tianqi also operates a lithium mine in Australia with the largest producer, Charlotte-based Albemarle Corp.
Together, the three companies control about two-thirds of global lithium production, according to Benchmark Mineral Intelligence.
As the second-largest shareholder of SQM, Tianqi will get "insights into the development plans of one of their major competitors," says Chris Berry, founder of House Mountain Partners LLC, a New York-based adviser to battery-metals companies and investors.
In a joint statement, Tianqi and Nutrien said they were pleased with the court's decision and expect the deal for the SQM shares to close by the end of the year.
Nutrien had to sell the SQM stake to comply with demands set by Indian and Chinese regulators overseeing a 2016 merger that created the Canadian company.
A spokeswoman for SQM didn't immediately respond to a request for comment.
The suit Mr. Ponce's companies filed with the Constitutional Court came after a court focused on competition issues approved an agreement that Tianqi struck with Chile's competition regulator. The agreement is meant to limit how much influence the Chinese company could have on SQM.
Under the deal, which lasts up to six years, Tianqi's board nominees for SQM can't be its own executives, directors or employees, for example. SQM has said it doesn't provide it with enough protections from a competitor.
The ruling Thursday means that the competition court can now work through motions that ask the tribunal to reconsider its initial decision on the deal between Tianqi and Chile's competition regulator. SQM and an affiliate of Mr. Ponce have filed such motions, according to Nutrien and Tianqi.
Write to Micah Maidenberg at firstname.lastname@example.org