Agrochemicals major United Phosphorus Ltd has closed its second deal in Brazil in the last four months by acquiring 51 per cent stake in DVA Agro Do Brazil for $150 million. According to a filing, the transaction will include United Phosphorus buying shares held by Germany’s DVA Group and other shareholders, and also making a primary infusion in the Latin American firm. The remaining 49 per cent stake in the company will be held by existing shareholders.
In April this year, United Phosphorus had acquired 50 per cent stake in Brazil-based Sipcam Isagro Brasil SA for an undisclosed amount. The share price of the firm was up 1.77 per cent in the morning, trading at Rs 157.95 per scrip.
According to VCCedge, financial research platform of VCCircle, this can be the single-largest acquisition of United Phosphorus, which has completed around a dozen M&A deals since 2005. Its largest deals include acquisitions of French chemical firm Arkema’s US (Cerexagri Inc., 2006) and French (Cerexagri S.A.S., 2007) crop protection units for $142.5 million and $140 million respectively.
DVA Agro Brazil had net revenue of $130 million for the year ending December 31, 2010. The company is involved in the production, marketing, selling and distribution of crop-protection products and specialties in the Brazilian agrichemicals market. Based out of Campinas, it has a formulation plant in the country which is currently in an expansion mode to build capabilities across different crop-protection products.
Germany’s DVA Group has diversified interests across areas like steel, plastics, nutrition and healthcare. Its crop-protection business is spread across Latin American countries like Argentina, Colombia, Paraguay and Mexico, with offices even in East Africa, China and India.
Although the financing of the deal was not disclosed, United Phosphorus had a total debt of Rs 2,500 crore and Rs 600 crore cash in hand. The net debt-to-equity ratio stood at 0.1 in FY11. United Phosphorus’ net revenue increased 7.3 per cent to Rs 5,805 crore, with net PAT up 1.5 per cent to Rs 558 crore in FY11.
United Phosphorus is one of the top five global generic agrochemical players. Incidentally, entry of new players in the industry is somewhat restricted due to high investments required for such initiatives. “We believe agrochemical companies would continue to do well in the wake of heightened food security risks and strong demand is likely to be witnessed across the world. Overall, we expect the global agrochemical industry to perform well from here on. However, generics are expected to register healthy growth due to increasing penetration and wresting market share from innovators and patent expiries worth $3-$4 billion during 2009-14,” an Angel Broking report on the company stated in May this year.