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Chinese authorities approve Adama merger with Sanonda

June 6, 2017
Energy & Chemical Value Chain

Adama Agricultural Solutions, a generic crop protection producer owned by ChemChina, has announced that the M&A panel of the China Securities Regulatory Commission (CSRC) has unconditionally approved its combination with Sanonda.

On completion of the transaction, the combined company will be floated on the Shenzhen Stock Exchange. The trading of Sanonda’s shares, which had recently been suspended during the CSRC’s final review process, resumed on 2 June.

Adama’s combination with Sanonda is expected to create the only integrated ‘Global-China’ crop protection company, with combined 2016 sales of $3.35 billion. At its outset, it will be the sixth largest global crop protection company and the largest in China, as well as the first global one to be publicly traded on the flagship A-share market. The combined company intends to raise around $250 million in new equity, which will be used to accelerate its growth. At current market prices, the combined company’s pro forma equity is valued at about $4.6 billion, placing its pro forma enterprise value at about $5.7 billion.

The combined company will operate under the Adama name and brand and will be led by Adama’s global management team, to be joined by colleagues from China engaged with the combined China operation. The central functions of the combined company will continue to be run from Israel, including global R&D, registration, and operations.

Hubei Sanonda Co. will be contributing around $300 million in sales, as well as significant commercial and operational capabilities, including competitive product positions which Adama has already started distributing globally and in China, such as key insecticide Acemain, which contains the active ingredient acephate, and herbicide Spraytop, which contains the active ingredient paraquat. The transaction will be accomplished through the issuance by Sanonda of about 1.82 billion new shares at a value of 10.20 renminbi ($1.54)/share, to Adama’s shareholder CNAC, in exchange for all the shares in Adama, which are valued for the purposes of the transaction at about $2.8 billion. The combined company’s shares will be listed on the Shenzhen Stock Exchange. Goldman Sachs Gao Hua Securities and Guotai Junan Securities are serving as financial advisors for the transaction, with Global Law Office as legal advisor.

ChemChina is in the process of acquiring Syngenta (Basel), the world’s largest agricultural chemicals company, for $43 billion. Adama and Sanonda will divest a significant part of their combined portfolio as part of antitrust requirements for ChemChina’s acquisition of Syngenta. To address the European Commission’s competition concerns, ChemChina earlier this year agreed to divest Adama’s generic fungicides for cereals, fruits, and canola, its herbicides for cereals, corn, sunflower, and vegetables; its insecticides for cereals, corn, fruits, canola, and vegetables; and its seed-treatment products for cereals and sugar beet. Adama will also divest 29 of its generic agchem products that are under development and a significant part of its plant growth regulator business for cereals. To gain FTC approval, ChemChina has agreed to divest Adama’s generic production of the herbicide paraquat, the insecticide abamectin, and the fungicide chlorothalonil to American Vanguard Corp. (Newport Beach, California).

China is the world’s third-largest agchems market. It was estimated to be worth $5.4 billion in 2015 and it is expected to grow to $6.8 billion by 2020. The market is highly fragmented with no player accounting for more than 10%. Multinational players account for only 23% of the market. Adama reported sales of $3.07 billion in 2016 and Sanonda posted revenues of $277 million.

By Natasha Alperowicz

Source: Chemical Week

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