UPL To Buy Arysta Lifescience For $4.2 Billion
Transaction backed by a $1.2 billion equity investment from Abu Dhabi Investment Authority unit and TPG.
UPL Ltd. said it has agreed to acquire agri-pesticides maker Arysta LifeScience Inc. for $4.2 billion in cash to become one of the world’s largest crop protection companies.
Its wholly owned subsidiary UPL Corporation Ltd. signed a definitive agreement with Platform Specialty Products Corporation to acquire Arysta LifeScience and its subsidiaries, the Indian agrochemicals company said in a press statement. The deal, subject to regulatory approvals, is expected to be completed by early next year.
The buyout will be backed by a $1.2-billion equity investment by Abu Dhabi Investment Authority and TPG. They will invest $600 million each for a combined 22 percent stake in UPL Corp.
UPL said it intends to use a combination of newly issued equity and debt for the acquisition. It has received debt financing commitments of $3 billion for the rest.
Shares of the chemicals maker have fallen more than 14 percent in the last one month amid worries that the deal will increase UPL’s leverage. UBS, in a prior note, estimated that the acquisition could increase UPL’s leverage fourfold. Net-debt-to Ebitda may rise from 1 to 4.2 times if the deal goes through, it said.
Arysta LifeScience, a unit of William Ackman-backed Platform Specialty Products Corporation, makes agrochemicals to protect crops from weeds, insects and diseases. Arysta reported operating revenue of $2 billion and adjusted earnings before interest tax depreciation and amortisation of $424 million in the year ended March, according to UPL’s filing. It reported a revenue of over $1.8 billion in 2017.
Other Highlights
According to the UPL statement and its conference call with analysts:
- Acquisition to not bring any additional debt from Arysta’s books.
- UPL sees $5 billion in combined sales and $1 billion Ebitda.
- More than 20 percent Ebitda margin pre-synergies expected.
- Deal expected to be EPS accretive by Rs 10 to 12 in the year through March 2020.
- Expects revenue synergies of $400-500 million in the next two-three years.
- Net debt to EBITDA could rise to 3.2-3.5 times initially; will to fall to 2.2-2.5 times post synergies
- The acquisition will give UPL access to a variety of patented products through collaborations and partnerships as well as enhanced in-house R&D capabilities.
- UPL will have an integrated supply chain with a backward integrated manufacturing base in major markets and deep distribution capabilities across the globe.