MOSL: UPL (Buy)-Identifying good seeds for a good crop; Acquires Arysta LifeScience for USD4.2b

UPL: Identifying good seeds for a good crop; Acquires Arysta LifeScience for USD4.2b

(UPLL IN, Mkt Cap USD4.1b, CMP INR550, TP INR664, 21% Upside, Buy)

• UPLL announced the acquisition of Arysta LifeScience – the agrochemical business of US-based Platform Chemicals – for a consideration of USD4.2b.
• The acquisition, which was done via UPPL’s wholly owned subsidiary UPL Corporation, is backed by USD1.2b equity investment from Abu Dhabi Investment Authority (ADIA) and TPG.
• ADIA and TPG will invest USD600m each in UPL Corporation for a combined stake of 22%; UPPL will fund the remaining USD3b via debt.

Expect synergies on multiple fronts

The acquisition of Arysta bodes well for UPLL on multiple fronts:

• Vast and diversified product portfolio: UPLL boasts of an agrochemical product portfolio that is spread out across geographies and crops (including fruits & vegetables, rice, soybean and cotton). The acquisition will not only boost UPPL’s product portfolio for crops where it already has a strong presence, but also in those where it has limited presence (e.g. wheat, barley, nuts and a wide variety of specialty crops). This apart, the acquisition will strengthen the company’s product portfolio in the European cereal market, where its presence is currently limited to sugar beet, fruits (grape) and vegetables. According to management, Arysta has a strong presence in bio solutions (among top eight global players) and seed treatment (ranked fourth globally). As Arysta is multiple times larger than UPLL in both the aforementioned categories, we believe the acquisition help UPPL to transform into a true integrated crop solutions provider.