Croda has announced an agreed offer to acquire the UK-listed crop-enhancement chemical specialist Plant Impact for approximately £10 million ($14.1 million).
Under the terms of the deal, which has been unanimously recommended by the Plant Impact board, the subsidiary Croda Europe will offer Plant Impact shareholders 10.57 pence in cash for each issued and to-be-issued ordinary share, a premium of approximately 79.9% to the closing price on 15 February. The acquisition is expected to complete on 28 March 2018, subject to shareholder agreement. Croda has received irrevocable acceptances from holders of 35.1% of Plant Impact shares in respect of the offer.
Croda says that acquiring Plant Impact will extend Croda’s life-science capabilities, adding an experienced commercial team and scientists, and a range of intellectual property and products to its customer base. Plant Impact’s head office and research facility are at the Rothamsted Centre for Research and Enterprise at Harpenden, United Kingdom. It also has commercial operations in Brazil, the United States, Argentina, and West Africa, with sales in more than 14 countries.
Analysts at Bernstein (London) say they believe Plant Impact was going to be sold to private equity at the beginning of this year, until Croda came along with a superior offer. The £10-million enterprise value—Plant Impact is debt free—corresponds to 1.2x Plant Impact’s sales. The company is currently money-losing at the EBIT level due to its high cost base, but has 80% gross margins. The company ran into difficulties last year when its share price collapsed from 50p to 6p, because Bayer had indicated that it would be unable to guarantee to offtake the minimum contracted volumes of Plant Impact’s flagship Veritas product to enhance soybean yields in Brazil.
Bernstein expects significant synergies with Croda’s existing crop-care business, primarily from manufacturing, which Plant Impact currently outsources from three UK contract manufacturers, and commercial overlap. Croda’s crop-care business has sales of about £220 million/year, approximately 16% of group sales. Plant Impact’s products, principally foliar sprays, are used to enhance yields and quality in horticultural crops, cocoa, and soybeans.
“Following the announcement by Plant Impact on 13 December 2017 regarding the 2018 revenue shortfall and the severe challenge this poses to the company, the board has reviewed its strategic options in parallel with conducting a wide ranging formal sale process,” says David Jones, chairman of Plant Impact. “The board has concluded that the best interests of the shareholders are served by selling the company now whilst it remains able to support its trading activities from its remaining cash reserves. Furthermore, the board believes that Croda’s plan for Plant Impact and Croda’s current expertise and market position in agricultural chemistry is a firm basis for Plant Impact to fulfil the promise that we have consistently described…”
By Natasha Alperowicz
Source: Chemical Week
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