A surprising development announced today is expected to make Adama (formerly Makhteshim Agan) a public company through a reverse merger into Chinese pesticide company Sanonda, which Adama is set to take over. As part of the emerging deal between the companies, most of the shares in Sanonda, listed on the Shenzhen Stock Exchange, will be allocated to Adama’s current owners (ChemChina and IDB group subsidiary Discount Investment Corporation (TASE: DISI)), who will continue to control Adama.
Adam’s current management, led by CEO Chen Lichtenstein, will continue managing the merged company, which is slated to change its name to Adama after the deal is completed. Sanonda’s management will manage the Chinese arm that Lichtenstein is setting up in China. Signing of a detailed agreement and completion of the deal is expected to take 9-12 months, and will require approval by the minority shareholders in Sanonda. No trading in the Chinese company’s share will take place during this period.
The measure includes another element, according to which Adama will distribute a $220-300 million dividend to its two current shareholders just before the deal is completed. This dividend (the amount of which has not yet been finally determined) will give Discount Investment $90-120 million to pay interest for 18-24 months on the huge $960 million loan it received from the Chinese against its holding in Adama.
The current deal is designed to solve Adama’s need to complete its acquisition of ChemChina’s agrochemical business, the wish to make Adama’s shares negotiable, and Discount Investment’s urgent need for cash to pay $15 million in quarterly interest on the loan to the Chinese, starting in December 2015. In addition, in contrast to the previous plan, it grants Adama full ownership of Sanonda’s assets.
By Omri Cohen