Coromandel to buy 42% stake in Sabero at Rs 250 cr

Coromandel International, a part of the USD 3.8 billion-Murugappa Group, on Tuesday said it is going to acquire 42.2% stake in Sabero Organics Gujarat, a Mumbai-based agrochemical manufacturer, for Rs 250 crore in an all cash deal.

According to Kapil Mehan, Managing Director, Coromandel International Limited, the company will make an open offer to purchase another 31% stake at Rs 160 per share from the market.

After the open offer, the total acquisition cost will be over Rs 400 crore that will be met through internal accruals, he said.

Reacting to the news, shares of Sabero today gained by 10% at Rs 97.90 while Coromandel International rose by 0.48% to Rs 316.75 on the Bombay Stock exchange.

The product profile of both the companies complements each other and the combined entity will have unmatched range of 16 technical grade pesticides catering to diverse needs of Indian and international customers, Mehan told reporters.

Sabero earned Rs 413 crore in revenue and a net profit of nearly Rs 11 crore last fiscal, ended March 31, 2011.

"This is a strategic acquisition done by the Coromandel. After the acquisition, the combined entity will be in top two or three players of Agrochemicals makers, with Rs 1,000 crore in revenue from plant protection chemicals in this fiscal.

The other complementary advantage is that Sabero has a large export base, with almost 50% of the revenue coming from international markets, which will be leveraged by Coromandel to expand international base," Mehan said.

Sabero earns around Rs 250 crore through exports while Coromandel earns about Rs 75 crore. Sabero has a large manufacturing base with an installed capacity of 60,000 tons. However, the utilization of the capacity is about 40%.

"We believe that with our net work and our marketing capability and export synergy we will be able to ramp up capacity utilization much faster," Mehan explained.

Sabero has around 250 product registrations in over 50 countries, including Brazil, Europe, Australia and African countries.

Mehan said Coromandel plans to invest around Rs 500 crore in this fiscal and major chunk of it will go in to expansion of the company