ChemChina To Buy 60% Of Israel's MA Industries

03.01.2011 -

China National Chemical (ChemChina) plans to buy 60% of Israel's MA Industries in China's latest move to expand in the global agricultural chemicals market.

The deal, which values the world's biggest maker of generic crop protection chemicals at $2.4 billion, would see MA parent company Koor Industries retain 40% of the maker of fungicides, pesticides and herbicides.

ChemChina will buy the 53% of MA held by the public for $1.272 billion and pay Koor $168 million for another 7%, the companies said.

Koor said it expects to sign the agreement with ChemChina within about two weeks and the deal is expected to close in the second or third quarter of 2011, though it added there is no assurance it will be completed.

Koor, which also owns 3.24% of Credit Suisse , will post a capital gain of 149 million shekels ($42 million) from the sale, which is priced at 19.98 shekels a share at the present exchange rate.

MA, which competes with Monsanto, Bayer and Syngenta, ultimately will become private.

Price Of Deal Lowered
The deal is the latest in a hungry China's search for global agricultural chemical production and distribution capabilities, areas that would cost a lot of money and take time to be developed domestically.

ChemChina and Sinochem, both state-run companies, have each made failed bids for Australian farm chemicals group Nufarm.

In October, Koor announced ChemChina was in talks to buy 70% of MA at a company valuation of $2.7 billion but a month later the Chinese company sought to reduce the valuation to $2.4 billion. The two sides also discussed ChemChina buying a smaller stake from Koor than originally planned.

"We believe the chances now of the ChemChina deal going ahead are very high, at a lower price than was originally announced," Bank Hapoalim analyst Yaron Fridman said.

"The price reduction was necessary due to the significant worsening of MA's results in the second half of 2010."

MA, also known as Makhteshim Agan, posted a wider net loss of $56.2 million in the third quarter, hit by a writedown at its Brazilian unit, rising costs and a one-off tax charge.

The transaction is subject to approval of MA's shareholders and government authorities in China.

As part of the deal, ChemChina is expected to arrange a seven-year non-recourse loan of $960 million to Koor, which will be secured by Koor's shares in MA. Koor is controlled by Discount Investment Corp, a subsidiary of conglomerate IDB Holding Corp.

ChemChina will sign with Koor a shareholders' agreement organizing their rights in MA, including nomination of directors on a proportional basis. ChemChina will be obligated to remain the largest shareholder in MA for a number of years, and Discount Investment will commit not to sell control in Koor for at least three years.

In September, MA halted talks to acquire U.S. firm Albaugh for about $1 billion, blaming its findings during due diligence.