The Makhteshim Agan Group, a world leader in branded off-patent crop protection solutions, and Albaugh Inc. (“Albaugh”), a privately held, leading manufacturer of off-patent crop protection products operating in the Americas, announced today that they have signed a Letter of Intent (“LOI”) providing for the acquisition of Albaugh by Makhteshim (“MAI”).
Under the terms of the LOI, Albaugh will be acquired for consideration of US$340 million payable
in cash upon completion; US$455 million in notes; 59 million common shares of MAI (equal to
approximately 12% of market share); and the assumption of up to (US) $280 million of Albaugh debt
(the “Consideration”).
The boards of directors of both companies unanimously approved signing the Letter of Intent. The
acquisition is conditional upon the successful completion of due diligence, the signing of a binding
Sales and Purchase Agreement (“SPA”) and approval of both companies’ boards, and is subject to
regulatory clearances in the U.S., Europe and other relevant jurisdictions, as well as other customary
conditions. MAI expects the transaction to close in the 4th Quarter of 2010 and to become EPS
accretive, on a non-GAAP basis, one year after completion of the acquisition.
The acquisition of Albaugh reinforces MAI’s position as the global leader in the off-patent crop
protection industry by significantly expanding its operations in the Americas. Founded in 1979, by
Dennis Albaugh, the company is the leading off-patent player in the Americas, particularly in the
U.S., Mexico, Argentina and Brazil.
In the U.S., Albaugh, headquartered in Ankeny, Iowa, features a state-of-the-art Glyphosate synthesis
plant and best-in-class supply chain management system with a diversified formulation site at an
optimal location in the heart of the U.S. grain belt. The facility has nine high-speed packing lines, six
million gallons of storage capacity and a large scale, advanced supply chain and logistics system
(including its own truck fleet plus tank trailers and rail link access).
In Latin America, Albaugh is a leading producer in the growing Mercosur market for 2,4-D and
Glyphosate and other products with a unique cost position. Its sales are driven by major herbicides
for use with genetically modified organisms (“GMOs”), and sugar. Albaugh is known for building
strong relationships with main distributors and possesses an expert management team with an
average of 18 years of individual industry experience. In Argentina, Albaugh’s subsidiary, Atanor,and MAI’s existing businesses are highly complementary and, combined, should provide significant opportunities for growth and development.
w2ww.main.co.il www.albaughinc.com
As the global leader in the off-patent crop protection industry, the combined company
will be well positioned to benefit from major agricultural growth trends, such as increases in the
world population, crop demand for bio-fuel use, as well as increasing meat consumption in
developing countries. It will operate in areas with significant growth potential and with a portfolio of
products that can leverage the most important growth trends. The combined company is also poised
to profit from economies of scale, with potential operating synergies of US$50 million to US$60
million. Customers of both companies stand to benefit from access to a broader range of crop
protection solutions and the efficiencies of the combined companies’ supply chain.
Mr. Dennis Albaugh, current sole owner of Albaugh, will become Chairman of North America and,
upon completion of the transaction, he will be a major shareholder in MAI . His U.S. management
team will include Spencer Vance, currently the President of Albaugh, who will become CEO, and
Rob Williams, currently CEO of Makhteshim Agan North America (MANA), who will become
Deputy CEO. In Argentina, Miguel Gonzalez will continue to serve as President and CEO of
Albaugh’s subsidiary, Atanor. The entire Americas management team will report to Shaul Friedland,
MAI’s President and CEO of the Americas.
Commenting on the acquisition, Nochi Dankner, Chairman of the IDB Group, MAI’s largest
shareholder, said, “We are very supportive of the transaction, which is consistent with IDB’s strategy
to expand our investments outside of Israel. This is an important development for Makhteshim Agan
and for the IDB Group.”
Avraham Bigger, Makhteshim Agan’s Chairman of the Board, said, “This transaction strengthens our
position as a world leading manufacturer and distributor of branded off-patent crop protection
products. Albaugh is an excellent strategic and geographic fit, and the directors of MAI believe the
acquisition represents compelling value. It complements MAI’s current business with Albaugh’s topnotch
operations in the Americas, innovative delivery and distribution systems, and stellar customer
relationships.”
Erez Vigodman, President and CEO of Makhteshim Agan, said, “This is a transformational
acquisition for MAI, consistent with our strategy of growing the business organically and through
acquisition. It also addresses a number of key strategic challenges which we identified in the
beginning of 2010. It extends our industry leadership to North and South America, giving us the
opportunity to participate in fast-growing markets and significantly improving the global balance and
diversity of our revenue sources. In combining the many strengths of MAI and Albaugh, we will
create substantial value for our customers, our employees and our shareholders for years to come.”
Dennis Albaugh, Chairman and CEO of Albaugh, said, “We are confident that this combination will
bring significant benefits to our customer and employees alike. Together, our two companies will
provide customers with a broader, more diverse product portfolio to serve their needs, and we will
continue to operate through strong partnerships with our network of distributors. As part of a
stronger, more competitive combined company, our employees will be given the tools and
opportunities to compete more effectively in the global marketplace.”
KEY BENEFITS OF THE TRANSACTION INCLUDE:
- Potential to be accretive to earnings within one year of completion on a non-GAAP basis;
- Significant penetration into the North American agriculture chemicals markets;
- Market-leading, low-cost operations in Latin America, with complementary sales capabilities and distribution relationships that positions the combined company to benefit also from
- projected growth of sugar/ethanol markets; w3ww.main.co.il www.albaughinc.com
- Highly efficient global production network couple with best-in-class supply chain;
- Attractive economies of scale in sourcing, manufacturing, development and registration to support international growth;
- Improved geographic balance across northern and southern Hemispheres promotes improved consistency in revenue flows and helps reduce exposure to currency translation risks;
- Strengthening of team by combining experienced and market-based managers of Albaugh with MAI capabilities;
- Significant product cross-selling opportunities expected across entire enlarged Company;
- Improved production capabilities in major and growing molecules, and
- Improved cost structure of active ingredients and products markets.