Acquisition funded through internal accruals; firm to come out with an open offer to acquire an additional 31% stake
Hyderabad-based Coromandel International Ltd (CIL), part of the Rs 17,051-crore Murugappa group of Chennai, has acquired the entire 42.2 per cent promoters’ stake in Sabero Organics Gujarat Limited, a Mumbai-based agrochemical manufacturer.
The all cash deal amounted to Rs 250 crore at Rs 160 per equity share a premium of around Rs 65 per share. The total valuation of the company stood at Rs 592.41 crore. The acquisition was funded through internal accruals.
Enam Securities Private Limited acted as financial advisor and AZB & Partner acted as legal advisors to the transaction. Sabero's stock price on BSE touched a 52-week high at Rs 97.90 on Tuesday, up 10 per cent (Rs 8.90) over the previous day's close of Rs 89.
CIL said it would come out with an open offer to acquire an additional 31 per cent stake at the same price taking the total cost of acquisition to over Rs 400 crore.
Sabero’s stock price on the Bombay Stock Exchange (BSE) touched a 52-week high at Rs 97.90 today, up 10 per cent (Rs 8.90) over the previous day’s close of Rs 89. “This is a very very strategic acquisition for Coromandel,” CIL Managing Director Kapil Mehan said justifying the premium paid for the company’s promoters.
According to Mehan, the acquisition catapults CIL into one of the top five players in the country’s Rs 8,000-crore pesticides market, which was growing at an average rate of 10-12 per cent a year. CIL is the second-largest producer of phosphatic fertilsers in the country.
He said the combined turnover of CIL and Sabero from crop protection products would be close Rs 1,000-crore “this year itself”. The two companies together have 16 technical grade pesticides.
A producer of fungicides, herbicides, insecticides and speciality chemicals, Sabero posted a turnover of Rs 413 crore and a net profit of Rs 17 crore in 2010-11. Exports accounted for about Rs 220 crore of the total turnover.
On the other hand, CIL has clocked a turnover of Rs 7, 527 crore last year. Of this, the income from crop protection products accounted for about Rs 500 crore.
Mehan told media persons that besides having a manufacturing facility in Gujarat, Sabero has four subsidiaries in Brazil, Argentina, Australia and Europe and boasts of about 240 registrations for its key products. Sabero is also currently implementing a special economic zone project at Dahej in Gujarat for manufacture of synthetic pyrethroids, which has good export potential.
However, Sabero was unable to utilise more than 40 per cent of its manufacturing base due to lack of adequate marketing network. “With our (CIL) marketing capabilities, we will be able to ramp up capacity utilisation faster,” Mehan said.
Sabero currently manufactures about 25,000 tonnes of technicals and formulations which represent about 30 per cent of permissions available with the company.
Murugappa group executive chairman, A Vellayan, stated that the acquisition was part of the strategic plan of the company to grow its non-subsidy businesses including the profitable pesticides business in India and export markets. “This strategy is to de-risk the company’s business by building a portfolio of subsidy and non-subsidy businesses,” he said.
