United Phos race for Arysta in final lap

In close fight with Israel’s Makhteshim, Australia’s Nufarm

MUMBAI: United Phosphorus Ltd (UPL) has entered the final round of a make-or-break bid for Arysta LifeSciences, the Japanese marketer having a global footprint for agrochemicals and pesticides.

The tab for acquiring Arysta will be not less than $1 billion, investment banking circles said. The buy can transform United Phosphorus and propel the Indian company into another orbit, they added.

“And it will not be a cakewalk for the Shroffs,” they said. Jai Shroff, executive director of UPL, along with a few investment bankers, are camping in Tokyo for the past two days, sources added.

It may spark a bidding war that may be expensive if it stretches far. As battling the Indian multi-national are Israeli agrochemicals major Makhteshim Agan Industries and Australian major Nufarm the second largest agrochemicals major. Olympus Capital Holdings is also on the fringes of the battle to acquire the company.

Apparently, Sumitomo was also interested in the Japanese company initially and investment banking circles have not written off the Japanese giant yet. Makhteshim Agan, the Israeli company, has raised a $550 million war chest to launch an aggressive bid for the Japanese agro-chemicals marketer. It raised $550 million with a tenure of 30 years, a record of sorts in Israel.

Makhteshim Agan like UPL is hungry to own Arysta as it could become a “company-transforming” deal that will gain market share in Eastern Europe and the Far East. Makhteshim CEO Avraham Biggerm the new CEO has been in aggressive pursuit to grow through the inorganic route and expand to newer markets. Almost 90% of its products are exported.

Moreover, for the Indian and Israeli manufacturers, Arysta makes sense has the company has strong brands and an effective marketing network but provides synergy to the rival bidders as the Japanese company lacks a manufacturing base.

How soon will this deal be struck? “A deal is about two weeks to a month away,” sources said. “Anything can happen,” he added. UPL anticipates a bidding war to heighten in the days ahead. Sources said that UPL could even walk away if they feel the deal is expensive. They have so far been making very calculated bids for brands and companies.

Closer home, the Shroffs have done their homework well. While the colour of money is important for clinching the deal, UPL is also expected to flaunt the past six acquisitions in which it has integrated people and brands.

Bankers have also designed a structure that will entail minimum risks to United Phosphorus and will ring-fence the Arysta from UPL, sources said.

In fact, last fortnight, the UPL headquarters in Khar Road saw hectic activity as teams from their American and European branches flew down to strategise and brainstorm on Arysta.

For United Phosphorus, the acquisition of Arysta is the most challenging one it has undertaken in recent times. Arysta’s sales revenues are almost the size of United Phosphorus. A successful acquisition can pole-vault the Indian agrochemicals major to the sixth position in the world rankings from its current 11th slot.

Makhteshim-Agan commands a market capitalisation of $ 3.5 billion, while UPL is valued at $ 1.7 billion in the local bourses.