Crop Protection Acquisition

Leading off-patent crop protection chemical specialist Makhteshim Agan Industries has agreed to buy Iowa-based Albaugh in a deal valued at $1.3 billion. The transaction is expected to close by the end of the year pending government approvals. It will boost the reach of MAI, based in Israel, in the Americas and augment its manufacturing capabilities.

Albaugh, the largest generic crop protection chemical firm in North America, will swell the Israeli firm's annual sales by $1.0 billion to about $3.1 billion, on the basis of 2009 results. It will bring to MAI manufacturing sites in the U.S., Brazil, Mexico, and Argentina, as well as a joint venture in China that produces N-(phosphonomethyl) iminodiacetic acid, a raw material for the weed killer glyphosate. Albaugh, which has about 3,000 employees, is a significant manufacturer of glyphosate, as well as herbicides 2,4-D and dicamba, various insecticides, fungicides, and plant-growth regulators.

According to MAI, the acquisition will put it significantly ahead of its two nearest generic crop protection chemical competitors, Australia's Nufarm and Japan's Sumitomo Chemical, which had 2009 sales of $1.8 billion and $1.4 billion, respectively. In April, Sumitomo acquired a 20% interest in Nufarm.

Dennis Albaugh, CEO and sole owner of the U.S. firm, will chair MAI's North America operations. Under the terms of the deal, MAI will acquire the U.S. firm for $340 million in cash, $455 million in notes, 12% of MAI's stock valued at about $200 million, and the assumption of $280 million in Albaugh's debt.

Roni Biron, who follows MAI's stock for UBS Investment Research, points out that in addition to boosting MAI's presence in the Americas, the transaction will bring MAI "low-cost production sites and access to large growers." The analyst adds that the new infrastructure will help MAI by "better optimizing its global supply chain."