Chemchina Eyes Makhteshim Agan

China National Chemical (ChemChina) is negotiating to buy Makhteshim Agan Industries, an Israeli maker of off-patent agricultural chemicals, in a transaction that would value the company at $2.7 billion. If a deal is worked out, ChemChina would displace DuPont as the world’s sixth-largest producer of agricultural chemicals.

Koor Industries, an investment company that now controls 47% of Makhteshim, says it has reached “preliminary principle understandings” on a transaction with the Chinese state-owned firm. Terms call for ChemChina to buy the 53% of Makhteshim shares now publicly traded and another 17% owned by Koor, giving the Chinese company a 70% interest in Makhteshim. Koor would retain a 30% interest.

“The deal would be hugely beneficial to the Chinese firm,” says consultant Gautam Sirur of U.K.-based Cropnosis. It would give ChemChina access to markets in Europe and Latin America where Makhteshim is strong. A transaction would also benefit Makhteshim by providing access to ChemChina’s financial resources and a low-cost source of fungicides, insecticides, and weed killers.

Adding Makhteshim’s $2 billion in 2009 sales to ChemChina’s crop protection sales of roughly $500 million would make the new entity the sixth-largest agricultural chemicals player, just ahead of DuPont but behind Monsanto, Sirur says. However, he notes, the deal faces at least one major hurdle: getting labor unions in Israel to agree to it.

Separately, Makhteshim last month called off the acquisition of U.S. generic crop protection firm Albaugh in a $1.3 billion deal because of discrepancies it found in Albaugh’s records (C&EN, Sept. 6, page 30). That deal would have increased the Israeli firm’s access to U.S. and South American markets and lowered production costs.

ChemChina’s move comes just as another state-owned Chinese firm, Sinochem, contemplates a bid for Canadian fertilizer producer PotashCorp. The two Chinese companies’ actions underscore the country’s efforts to internationalize its crop chemicals operations. In 2007, ChemChina failed in an attempt to buy Nufarm, an Australian producer of generic agricultural chemicals, for $2.8 billion. Two years later, Sinochem made an unsuccessful $2.5 billion bid for Nufarm (C&EN, Oct. 5, 2009, page 12).