MA shares slip after ChemChina cuts bid by $320m

Date:11-24-2010

Shares in Makhteshim Agan Industries continued their slide on Monday after the groups Chinese suitor, ChemChina, sought to cut by $320m the terms of a proposed takeover.

Stock in the agrichemicals company, better known as MA Industries, closed down 4.1% to 16.30 shekels in Tel Aviv.

The decline took to 8.7% the shares total losses since the groups biggest shareholder, Koor Industries, revealed on Sunday that it was being pressed for better terms on the sale of most of its stake to ChemChina.

Besides a 12% haircut to the deal, reducing its vale to $2.4bn, the Chinese company is seeking to raise the holding that Koor would retain.
Under initial outline terms agreed last month, Koor, which currently owns 44% of MA Group, was to have kept 30%, with ChemChina aiming to offer for all other shares to take its stake to 70%.

Furthermore, Koor is being asked to give up a lucrative put option included in the initial deal, which would give it the right to sell its remaining stake for a valuation raised by 20% a year.

Performance headwinds

Neither Koor nor MA Group gave any reason for ChemChinas attempt for better terms, a frequent ploy by Chinese bidders.

A year ago, for instance, Chinas Sinochem sought to cut its bid for Nufarm, prompting the Australian agrichemicals group to opt for a deal with Japans Sumitomo Chemical instead.

However, ChemChinas move follows a profits warning by MA Group last month over increased tax expenses and restructuring of Brazilian operations.

MA Group highlighted a further one-off charge three weeks ago, in an agreement with unions over potential job losses prompted by the ChemChina deal.

Koor said that, despite ChemChinas move, talks were "continuing at full speed", although they were expected to last "for some further weeks", and could yet not result in a deal.

In the red again?

Analysts at Psagot Securities said that, even excluding exceptional charges, they expected MA Groups third quarter results, issued on Tuesday, to "again indicate a net loss", of $13m, in the face of torrid competition in the market for glyphosate weedkillers.

"The need for increased marketing efforts in light of competition and the large increase in administrative and general expenses due to the companys in-depth strategic examination are expected to continue and lead to relatively high operating expenses," the broker said.