Both the companies have signed a pact under which Isagro will exit the joint venture and UPL will join with 50% stake, the Indian company said in a statement on Monday.
“The deal size is being pegged around $600 million or 2,700 crore,” said a person close to the development. The deal is expected to be closed in the next one month and the acquisition will be funded largely through internal accrual, as the company has enough cash in hand, he said. As on December 31, 2010, the company had nearly 1,800 crore cash in balance.
“UPL has not disclosed the size of the deal, however, considering the company's under-leverage balance sheet we believe funding for the acquisition should not be an issue,” said Sageraj Bariya, a senior analyst with Angel Broking.
Sipcam, a local producer and distributor of agrochemical, has a formulation plant in Brazil with capabilities in various formulation types for crop protection products. Its revenue stood at about $1 billion last year, UPL said in the statement. With this acquisition UPL will make its entry into Brazil's $7-billion crop protection market, amongst the five largest in the world.
“Given the high entry barriers this market enjoy coupled with UPL's limited presence locally, Sipcom represents a unique opportunity to kickstart operations on a larger scale,” said Jai Shroff, chief executive officer, UPL. Through this new venture, the company will target untapped and better market opportunities, Shroff said. This will be the third acquisition by UPL in the current fiscal year after it bought Mancozeb and the brand Manzate from DuPont and RiceCo Llc.