Fertiliser-maker Coromandel International has struck a deal to acquire the entire 42.2 per cent stake in agri-chemicals maker Sabero Organics Gujarat, owned by its promoters the Chuganee family. Coromandel will pay Rs 284 crore ($63.1 million), including Rs 55 crore ($12.2 million), as a non-compete fee.
The deal will trigger a mandatory open offer for 20 per cent stake, but the Murugappa Group-controlled Coromandel is looking to buy as much as an additional 31 per cent stake. If the open offer is at the same price of Rs 160 a share (not factoring in another Rs 38.47 per share as non-compete fee being paid to the Chuganee family), that may cost it around Rs 168 crore ($37.3 million). Coromandel has not said at what price the open offer will be made.
The transaction is at a high premium to existing stock price of Sabero Organics. Sabero scrip shot up 10 per cent to hit the upper circuit of Rs 97.9 a share. The deal has been sealed at 80 per cent premium to the last traded price on Monday, i.e., before the deal announcement.
Sabero Organics reported a consolidated net profit of Rs 10.58 crore on net sales of Rs 413 crore for the year ended March, 2011. The deal values the company at Rs 542 crore ($120.4 million), 11.5 times EBITDA for last fiscal and 51 times trailing net profit.
The deal will bring synergies for Coromandel in targeting the same set of customers with another product line. Sabero Organics Gujarat was established in 1991 and manufactures specialty and crop-protection chemicals.
It has a diverse product portfolio – manufacturing and marketing a variety of fungicides, herbicides, insecticides and specialty chemicals. It has offices and subsidiaries in Europe, Brazil, Argentina, the Philippines and Australia, and derives more than half of its revenues from overseas business.
Coromandel has seen strong cash generation from its core operations in the past few years and closed FY11 with a net profit of Rs 694 crore ($154 million).