UPL to be 5th largest in crop protection after Arysta acquisition

Tractor spraying soybean field

If the acquisition of Arysta Life Sciences, a part of the US-based Platform Specialty Products goes through, it will make UPL the world’s fifth largest crop protection company and the largest generic player. The company is currently the ninth largest with annual revenues of $2.7 bn.

Why is it important

  • If the deal goes through, it will help UPL in getting better terms from distributors and will be able to offer a wider portfolio of products to customers.
  • Sourcing costs will be reduced as Arysta gets most of its raw materials from India and China.
  • UPL will benefit from Arysta’s greater geographical presence and supply chain efficiencies.
  • UPL’s contribution to the deal for a 51% stake stands at just under Rs 14,000 crores. At an acquisition price of $4 billion (~Rs 27,000 crores), the deal pegs the valuations at 10.3 times EV/EBIT.

Stock to be impacted

UPL has a consolidated gross debt of Rs 65 billion with debt to equity at 0.6 times. While there is scope to increase leverage a bit, additional debt might impact earnings.

UPL Ltd. (CMP: Rs. 636, Mkt Cap: Rs. 32,442 Crores, FY2020 EV/EBITDA: 7.8)

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