UPL in merger talks with 2 American companies and to sell its holding in Agri Net Solutions

UPL Ltd’s founding Shroff family is exploring a merger with at least two American firms—CF Industries Holdings Inc. and FMC Corp.—as part of the family’s plan to ensure a fair distribution of businesses and assets among its members, two people aware of the discussions said.

Mumbai-based UPL, valued at around ₹55,000 crore, is one of the largest agrochemicals companies in the world. The company produces industrial chemicals, chemical intermediates and speciality chemicals and offers crop protection solutions.

The promoters of UPL are considering several options but leaning towards a merger because it may fetch much better value for their 28.24% stake and public shareholders, one of the two people cited above said, seeking anonymity.

“A merger at this stage is likely to fetch at least a 15% premium to UPL’s current worth, which translates to around $8.9 billion or ₹63,000 crore—the largest deal in the agrochemicals space in Asia, if formalized," said the first person.

A spokesperson for UPL denied talks of a potential merger with FMC Corp. or CF Industries.

UPL has hired investment bank Evercore Group LLC to advise the promoters on the best option and whether a merger deal would benefit members of the promoter family and public shareholders.

Goldman Sachs, too, has been hired by one of the two American firms to explore a merger or takeover in India. A Goldman Sachs spokesperson declined to comment.

UPL is currently overseen by octogenarian chairman and founder Rajnikant Devidas Shroff. He started the business as a manufacturer of mercury salts at a British plant. The chairman’s elder son, Jai, is the CEO of UPL, while his younger brother, Vikram, serves as a member on the company’s board.

The two American firms are keen on expanding their footprint, and all the three companies are laying stress on ESG (environmental, social and corporate governance), clean energy and sustainability-oriented business processes, the two people said.

CF Industries Holdings is a leading manufacturer of hydrogen and nitrogen products.

Responding to an email from Mint, Chris Close, a US-based spokesperson at CF Industries, said, “CF Industries does not comment on market speculation."

Philadelphia-based FMC Corp. is a global agricultural sciences firm that helps growers produce food, fibre and fuel apart from providing crop protection solutions.

Replying to an email on a potential deal with UPL, FMC spokesperson Lars Weborg said, “FMC does not comment on industry rumours or speculation."

If the merger plan goes through, “the shortlisted entity (CF Industries or FMC) may own a majority stake in the merged entity while the Shroff family may hold a minority stake. Since a large number of shares are held by public shareholders, UPL promoters may look for buyback of shares from the market to make any potential merger process easier," said the first person.

The board of UPL on Thursday approved a buyback proposal. On Friday, while the benchmark Sensex closed down by 1.4%, UPL’s stock was only marginally down by 0.17% to ₹713.5. The stock has gained about 3% since the buyback was announced.

An email to Evercore Group remained unanswered.

UPL offers a range of fertilizers and agricultural chemicals, including herbicides, insecticides and seed treatments. It also sells other products used to stimulate plant growth, store crops, conserve water, and a line of disease-resistant seed varieties.

In 2018, UPL acquired Arysta LifeScience Inc. for $4.2 billion in a deal that transformed the company into one of the world’s largest generic agrochemicals firms.

In addition, according to India Chemical News, UPL Limited will transfer its entire holding of 49.98% in equity share capital of its subsidiary viz. Agri Net Solutions Limited ('ANSL'). Post transfer, ANSL will cease to be the subsidiary of the company.