ADIA to back UPL’s $4.3 billion Arysta buy with $1 billion funding

Abu Dhabi Investment Authority (ADIA), the world’s second-largest sovereign wealth fund, is set to invest $1 billion to acquire a 20% stake in UPL Corporation, the Mauritius-based arm of India-listed UPL Ltd, said several people aware of the plan.

UPL Corporation, formerly Bio-Win Corporation, houses UPL’s expansive global agrochemicals business, which contributed 87% of its FY18 sales of over $2.7 billion.

This will be the vehicle that the Mumbaibased company will use to acquire Platform Specialty Products Corp’s agricultural pesticides business called Arysta Life-Science for $4.3 billion, they added.

While ADIA will provide $1 billion in equity funding — it’s single biggest commitment to an Indian company till date — UPL is organising the remaining $3.3 billion from Asian and European banks.

UPL Corporation raised $300 million through dollar-denominated bonds in March.

UPL is the world’s second-largest postpatent agrochemicals company. Platform, the chemical maker whose biggest stakeholder is Bill Ackman’s Pershing Square Capital Management with a 14% stake, said in June it had entered exclusive negotiations on a potential sale of Arysta.

The West Palm Beach, Florida-based company announced its intention last year to separate the crop chemicals business from its industrial chemicals division, at first planning to hive it off into a separate publicly traded company. Arysta LifeScience employs about 3,000 people and accounted for about half of Platform’s sales of $3.8 billion last year.

Jaidev (Jai) Shroff, global CEO of UPL, and an ADIA spokesperson declined to comment on the matter.

Both sides are likely to finalise the terms this week before making a formal announcement by this month end. Jai Shroff-led UPL had walked away from the transaction late last month over a valuation mismatch but re-engaged after other potential suitors left. 

Platform had said it was in talks with UK investment vehicle Wilmcote Holdings Plc about a potential deal.



Like Platform, UPL, earlier known as United Phosphorus Ltd, has also been a serial acquirer with over 25 takeovers in two decades. The company that started in 1969 as a manufacturer of red phosphorus, used in safety matches and pesticides, is today spread across 133 countries with 33 manufacturing facilities in 11 countries spanning the entire agrochemicals value chain of seeds to specialised post-harvest products.

Arysta will be UPL’s largest bet. Once completed, it will make UPL the world’s fifth-largest crop-protection company and the biggest generic player with a combined revenue of slightly less than $4.6 billion. The company is currently the ninth-largest.

Analysts favour UPL’s long-term prospects, led by its focus on branding and launching of innovative products, maintaining geographical presence, catering to major crops, increasing share in the global market and consistent investments in backward and forward integration, resulting in better cost management.

“Global consolidation is an opportunity for companies such as UPL to gain better access to distribution,” said Basanth Patil, an analyst with HDFC Securities.

The space has seen unprecedented consolidation with the Dow Chemicals-DuPont, Bayer-Monsanto and Sygenta-Adama mergers. More than 80% of the global market share is held by only four companies.

UPL’s strong manufacturing base will help reduce sourcing costs as Arysta gets most of its raw material from India and China. A strong supply chain can then be integrated with Arysta, which has a presence in more countries, thereby benefiting from market access.

ADIA has been increasing its India play after recently committing $1billion in the government’s National Investment & InfrastructureFund’s Master Fund. In infrastructure, ADIA owns minority stakes in Indian renewable energy producer ReNew Power Ventures Pvt and Greenko Energy Holdings.

Last November, it acquired a minority stake in Cube Highways and Infrastructure Pte, a road platform formed by I Squared Capital and World Bank’s International Finance Corp and a month later, it picked up a minority stake in KKR India Financial Services Pvt, an alternative credit business of global private equity leader KKR & Co in India, for an undisclosed amount.

ADIA owns a minority stake in Reliance Nippon Life Asset Management Ltd. Its other bets include Security and Intelligence Services (India) Ltd and securities depository firm Central Depository Services (India) Ltd. In real estate, it invested $200 million in Kotak’s realty fund.