The merger between agrochemicals maker Excel Crop Care and Japan's Sumitomo Chemicals will test shareholders’ enthusiasm at the extraordinary general meeting (EGM) on March 30, when the scheme of amalgamation motion will be put to vote.
The merger, once approved at the NCLT convened EGM later this week, will mark the onset of a trend wherein global players are open to the idea of listing their Indian businesses and thereby allowing public shareholders to participate in future value creation instead of taking the Indian business private by delisting it from the stock exchanges.
Excel Crop Care’s merger with Sumitomo Chemicals’ India will catapult it into one of the leading Indian agrochemical companies.
The merger with Sumitomo Chemical India will be positive for Excel as it will be able to extend its generics-only product portfolio to speciality/proprietary chemicals thereby creating a comprehensive bouquet of products for its customers. Under the merger, Excel will also benefit by transforming itself from being a domestic company to a multinational company.
There is a strong rationale for the merger that creates a wide and deep economic moat for the business:
-Highly complementary nature of both the businesses with Excel at 100% in generics while Sumitomo Chemical India’s stronghold of 63% in proprietary (speciality) products
-Opportunity to boost sales through co-selling and by leveraging the expanded distribution network of more than 13,000 distributors across India
-Operational synergy to assist in research, development and launch of new products thereby de-risking of business through expansion of product portfolio and reduction in customer concentration
-In international business, Excel’s brands will gain further credibility by harnessing SCC Japan’s global presence. On top of this, the Excel brands stand to gain by having an innovation-driven company as its parent company
As the merged entity breaks into the ranks of top 5 agrochemical companies in India, business is expected to gain on the back of a global brand’s support, full suite of product offerings, deeply entrenched pan-India distribution network and enhanced access to active ingredients.
While globally, non-integrated players in the agrochemical industry are bearing the brunt of restricted supplies from China in the form of rising prices of actives, Excel’s integrated platform post-merger gives it an opportunity to create an edge over peers and gain market share.