Coromandel buys Sabero Organics

Fertilizers major Coromandel International, part of Murugappa Group, is buying the entire promoters' stake in Sabero Organics Gujarat, a maker of insecticides and herbicides. Shares of Sabero Organics surged 10% on Tuesday to close at Rs 97.9, a new high on the BSE, after Coromandel said it would buy out the promoters for Rs 198.47 per share. Trading in Sabero shares has been frozen for want of sellers. The Coromandel counter, however, saw a muted response with shares inching up 0.4% to close at Rs. 316.75 on BSE.The Rs 7,527-crore Coromandel isacquiring the 42.22% stake held by promoters at Rs 160 per share and is alsopaying a non-compete fee of Rs 38.47 per share. This would work out to around Rs283 crore and the total acquisition cost, including the public offer, isexpected to cost Coromandel about Rs 400 crore to Rs 450 crore. The companywould make an announcement to Sabero shareholders for acquiring up to anadditional 31% stake."The transaction will be funded throughinternal accruals," the company said in a statement. With this acquisition,Coromandel would be among the top 5 companies offering plant protection productsin India.Announcing the acquisition, A Vellayan, executive chairman,Murugappa Group, said that the acquisition is a part of the strategic plan togrow non-subsidy businesses including the profitable pesticides business inIndian and export markets."This strategy is to derisk company'sbusiness by building a portfolio of subsidy and non-subsidy businesses," hesaid. Sabero, which ended fiscal 2011 with Rs 413 crore in revenues, is aleading producer and supplier of a variety of fungicides, herbicides,insecticides and speciality chemicals.The company, a significantplayer in Mancozeb fungicide in the global markets with subsidiaries inArgentina, Brazil, Australia and Europe, gets about Rs 220 crore in exportsalone."The product profile of both the companies complements eachother and the combined entity will have a range of 16 technical gradepesticides," said Kapil Mehan, managing director, CoromandelInternational.Sabero has manufacturing facilities in SarigamIndustrial Estate near Vapi, Gujarat. It is currently implementing a SEZ projectin Dahej, Gujarat, for manufacture of synthetic pyrethroids which have very goodexport potential.