FMC Corp. Buys Auriga's Unit Cheminova for $1.8 Billion
In a move to bolster its core agriculture business, chemical company FMC Corp. (FMC) has agreed to buy Denmark-based Auriga Industries’ fully-owned unit – Cheminova A/S – for $1.8 billion. Cheminova, which has a strong foothold in Europe and Latin America, develops and markets crop protection products.
The buyout, which is subject to regulatory clearances, approval by Auriga’s shareholders and other closing conditions, is expected to close in early 2015. FMC Corp. plans to finance the acquisition through a combination of cash and debt.
The deal is expected to be accretive to FMC Corp.’s adjusted earnings in the first full year following the takeover. The company expects to realize synergies through production and operating efficiency gains and better market access.
Goldman Sachs (GS) served as financial advisor to FMC Corp. on the deal while Citigroup (C) offered additional financial advice and committed debt facilities. JPMorgan (JPM) acted as financial advisor to Auriga.
FMC Corp.’s shares, which are down around 12% so far this year, rose as much as 1.6% in the trading session yesterday following the deal announcement.
The acquisition of Cheminova is a strategic fit for FMC Corp. as the former has a highly complementary product portfolio and technologies as well as geographic footprint. Cheminova possesses a portfolio of over 60 active ingredients, more than 2,300 registrations and a pipeline of active ingredients currently under development.
The buyout is expected to strengthen offerings in FMC Corp.’s Agricultural Solutions segment and reinforce the company’s access in major agricultural end markets. Cheminova’s technology will enable FMC Corp. to boost its foothold in crop segments while offering further access to additional crops including cereals. Cheminova’s complementary insecticide and herbicide technologies will expand the company’s fungicide portfolio.
Separately, FMC Corp. said that it will modify its earlier announced separation plans by selling its Alkali Chemicals unit while retaining the lithium business. The company, in Mar 2014, announced its plans to split itself into two independent public companies through the separation of its growth businesses – Agricultural Solutions and Health and Nutrition – from the cyclical Minerals division. However, yesterday’s announcement represents a revision of the original plan.
The sale of the alkali chemicals business will enable FMC Corp. to de-lever its balance sheet to an extent which is best fit for the company. The divestment is expected to complete by mid-2015. The company will retain its Lithium unit as a separate operating segment.
FMC Corp. is a Zacks Rank #3 (Hold) stock.
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