UPL to become fifth largest agrochem firm, globally

Agrochemical company UPL has announced the acquisition Arysta, a global provider of innovative crop protection solutions, including BioSolutions and Seed Treatment.

The acquisition deal is valued at US$4.2 billion which will be paid in cash. In terms of valuation, the deal is priced at 2.1x EV/Sales and 9.9x EV/EBITDA FY18. The company believes this acquisition would close by January 2019, subject to customary closing conditions and regulatory approvals. The company announced the acquisition through a filing to the exchanges on Friday.

Post this acquisition, UPL will become the fifth largest agrochemical company in the world. The acquisition would improve the combined annual revenues by US$ 400-500 million. Besides, it would result in annual cost synergies of US$200 million. The company’s management believes that the deal will be EPS accretive by FY20.

However, given the deal size, this acquisition is expected to strain the company's balance sheet.

Reacting to the news, on Monday, UPL became the top gainer among Nifty 50 stocks, with almost 8 per cent gain in the early hours of trade. At 10.38 hours, the stock was trading at Rs. 580, up by 5.5 per cent, on NSE.