In one of the largest overseas deals by India Inc in recent years, chemicals producer UPL (formerly United Phosphates) today teamed up with Abu Dhabi Investment Authority and TPG to snap up Florida-based Arysta Life Science Inc for USD 4.2 billion in an all-cash deal.
The transaction will enhance the position of UPL as a global leader in the agriculture solutions market and make it a USD 5 billion entity in combined sales offering it a USD 200 million savings through operational synergies.
The tie-up will see Abu Dhabi Investment Authority, which is the world’s second-largest sovereign wealth fund, and private equity major TPG Capital infusing USD 1.2 billion into UPL Corporation, the Mauritius-based international arm of UPL and the acquirer company, and will collectively own 22 per cent. These new investors will infuse USD 600 million each, UPL said in a statement.
Though known for acquisitions, Arysta is UPL’s largest bet. Once completed, it will make UPL the world’s fifth- largest crop-protection company after Bayer, DuPont, Syngenta and the biggest generic player with a combined revenue of USD 5 billion. Currently, it is the ninth-largest player.
UPL vice-chairman Vikram Shroff said the all-cash deal was signed between UPL Corporation and the Florida-based NYSE-listed Platform Specialty Products Corporation’s farm pesticides business under Arysta Life Science Inc brand and its subsidiaries.
Platform is a leading chemical maker and Bill Ackman’s Pershing Square Capital Management is its biggest stakeholder with 14 per cent stake. Its subsidiary Arysta is a global provider of innovative crop protection solutions, including bio solutions and seed treatment.
Arysta was formed through a combination of Arysta Life Science, acquired by Platform in February 2015 and two additional crop protection chemical companies, Agriphar and Chemtura Agro Solutions of Chemtura Corporation, acquired by Platform in 2014.
For the year to March 2018, Arysta reported an operating revenue of USD 2 billion and operating profit of USD 424 million.
For the rest of the funding gap, UPL has tied up a clutch of lenders to raise USD 3 billion to fund the debt-driven deal. Foreign lenders for the bridge loan facility include Mitsubishi UFJ Financial Group of Japan and Rabobank from its Hong Kong branch.
“We’ve received debt financing commitments of USD 3 billion for the balance of the consideration for the deal, with a bullet maturity of five years, from MUFG Bank and Rabobank’s Hong Kong branch,” the company said.
Shroff said acquisition will help UPL log in a USD 1 billion pre-tax profit and boost its margins to over 20 per cent due to the synergies between the two companies in terms of geographies, crops and products, manufacturing and differentiated R&D capabilities.
“The deal is expected to drive annual synergies of over USD 200 million,” he said, adding it will also help fulfill UPL’s objective of creating an integrated patent and post-patent agri solutions business with a global footprint and transform into a leading crop solutions company.
Apart from giving UPL access to a differentiated product portfolio, the acquisition will make UPL one of the world’s largest global crop protection companies.
Jai Shroff, group chief executive and executive director said, “Arysta has a differentiated position in the crop protection market given its focus primarily on speciality applications and tailored local solutions. And this deal is in line with our long-term vision of becoming a premier global provider of agricultural solutions designed to secure the world’s long-term food supply.”
Joining him, Rakesh Sachdev, chief executive of Platform said, “with its scale and capabilities, we believe the combined companies will represent a compelling value proposition for growers, distributors, suppliers and innovation partners in a consolidating market.
For the Florida-headquartered Platform, the deal with UPL is part of its plans to separate the crop chemicals business from its industrial chemicals division.
Arysta employs about 3,000 and accounted for about half of Platform’s USD 3.8-billion sales last year.
UPL has been a serial acquirer with over 25 buyouts in the past 20 decades. Began in 1969 as a manufacturer of red phosphorus used in safety matches and pesticides, today it has operations in 133 countries with 33 manufacturing facilities in 11 countries covering the entire agrochemicals value-chain from seeds to specialised post-harvest products.
UPL will have an integrated supply chain with a backward integrated manufacturing base in major markets and deep distribution capabilities across the globe to address needs of growers, he added.
Platform chairman Martin Franklin said, “We decided to separate our businesses last year to position both the performance solutions and agri solutions businesses for future growth and additional compelling value creation opportunities. This deal creates an agricultural chemicals powerhouse with highly complementary capabilities. We are excited to see what the two combined companies can accomplish.”
For FY18, UPL reported operating revenue of USD 2.7 billion and pre-tax profit of USD 543 million.
Evercore, JP Morgan, UBS, Greenberg Traurig, Credit Suisse, Jones Day, J Sagar Associates, Cleary Gottlieb and Platinum Partners acted as financial and legal advisors.
UPL shares which had lost about 25 per cent so far this year, slipped 0.5 per cent to Rs 567.45 on the BSE against a 0.4 per cent gain in the benchmark.
