UPL Advanta Merger Scheme · 2020-02-04 · UPL Shareholding Pattern Promoter Group 29.8% 70.2%...
Transcript of UPL Advanta Merger Scheme · 2020-02-04 · UPL Shareholding Pattern Promoter Group 29.8% 70.2%...
February 25, 2016
UPL – Advanta Merger Scheme
Investor Presentation
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Merger
Merger Overview
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Appointed Date
Swap Ratio
Terms of Preference
Shares
• The appointed date for merger is April 1, 2015
• 1 UPL equity share for 1 equity share of Advanta• 3 Optionally Convertible Preference Shares (of par value Rs. 10 each) of
UPL for 1 equity share of resident shareholders of Advanta• 3 Compulsorily Convertible Preference Shares (of par value Rs. 10 each)
of UPL for 1 equity share of non-resident shareholders of Advanta• Advanta GDR holders holding 1 GDR will be issued 1.06 GDR of UPL
• Face Value: Rs. 10• Tenure: 18 months• Rate of Dividend: 5% payable annually• Convertibility Option: Shareholders have the option of converting
Preference Shares any time after issue date• Redemption: Optionally Redeemable Convertible Preference Shares
to be redeemed at par at the end of 18 months
Regulatory Approvals
• The key approvals required for the proposed Scheme are:• Shareholders / Creditors / Lenders of UPL and Advanta• SEBI and Stock Exchanges• Competition Commission of India / RBI• Jurisdictional High Court of Gujarat
• Such other approvals as may be required
Terms of Share Swap
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• For e.g. Shareholder A (Resident) holds 157 Equity Shares (face value of Rs. 2 per
share) of Advanta
• As per the merger scheme, he will get:
• 157 Equity Shares (face value of Rs. 2 per share) of UPL
• 471 Optionally Convertible Preference Shares (face value of Rs. 10 per share) of
UPL
• Conversion Ratio - Optionally Convertible Preference Shares is 471 Preference
Shares : 10 Equity Shares
• For e.g. Shareholder B (Non-Resident) holds 157 Equity Shares (face value of Rs. 2 per
share) of Advanta
• As per the merger scheme, he will get:
• 157 Equity Shares (face value of Rs. 2 per share) of UPL
• 471 Compulsorily Convertible Preference Shares (face value of Rs. 10 per share)
of UPL
• Conversion Ratio - Compulsorily Convertible Preference Shares is 471
Preference Shares : 10 Equity Shares
UPL Shareholding Pattern
Promoter Group
29.8% 70.2%
48.4%
13.0%
Public
As of November 20, 2015
If Nov. 20, 2015 share holding structure is used as the basis, 77.45 mn new UPL equity shares would have to be issued
Fully Diluted Ownership Post Merger
Promoter Group
29.8% 70.2%
38.9%
10.5%
PublicPromoter
Group
27.8% 72.2%
Public
Assumptions:• Advanta outstanding FCCB’s will be fully converted• Advanta outstanding ESOP’s will be fully exercised
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38.6% 50.6%
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Background
UPL and Advanta – A Snapshot
Global Agrochemical Company Transnational Plant Genetics Company
Global crop protection solutions providerOverview
Products
Market Leadership
Operations
Marketing and Distribution
Leading international field crops and vegetable seed company
Fungicides, Herbicides, Insecticides, Rodenticides, Specialty Chemicals
11th largest agrochemical company globally
28 manufacturing locations in 9countries across 3 continents
120 patents, 4,600+ registrations
Direct presence: 40 countries
Key Brands: Ulala, Starthene, Unizeb Gold, Devrinol, Lifeline
Seeds: Sorghum, Sunflower, Corn, Canola, Mustard, Rice, Wheat, Nutrifeeds
Vegetable crops
Direct presence: 6 countries
Key Brands: Advanta, Pacific Seeds, Alta Seeds, Vereda & Golden Seeds
11th largest seed company globally World leader in Sorghum Large South Asian vegetable seeds co.
2 biotech and 15 R&D stations Processing facilities in 5 countries Strong technology collaborations
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UPL – Transformational GrowthFY 2005 FY 2015
Geographical
Focus
Products
Businesses
• Primarily Domestic
Player
• Technical Sales
• Mainly Generics
• Crop Protection
• Amongst Global Top 11
• Branded Formulations
• Patented, Proprietary and Generics
• Crop Solutions and Adjacent Technologies
Revenue(INR mn)
PAT(INR mn)
Market Cap(INR mn)
• Organic Growth through
R&D and Product
Innovation
• Acquisition of Advanta
(2006), Cerexagri (2006),
RiceCo (2010), DVA Agro
(2011)
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24,187
189,529
FY05 FY15
1,560
11,440
FY05 FY15
14,163
120,905
FY05 FY15
Source: Company filings. Market capitalization as of March 31 for respective fiscal years.
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Advanta – Transformational GrowthCY 2006 CY 2014
Geographical
Focus
Products
Businesses
• Asia-Pac (incl. India), Argentina
• Proprietary germplasm on field crops
• Sorghum, tropical corn, sunflower
• Regional producer and seller
• 11th largest seed company, globally
• Superior seeds –germplasm, molecular marker, disease resistant technology
• Significantly enhanced seeds offering
Revenue(INR mn)
EBITDA(INR mn)
Market Cap(INR mn)
• Organic growth- added presence in EU, NAFTA, Indonesia, Brazil
• Added vegetables crops, genetically modified seeds - Corn and Canola, wheat in Australia
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Source: Company filings. Market capitalization as of IPO date (April 19, 2007) and December 31, 2014.
509
2,502
CY06 CY14
2,865
18,636
CY06 CY14
14,310
30,104
On IPO CY14
Key Financials: UPL and Advanta
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UPL
Mar. 31, 2015
(Proforma)
Advanta
Dec. 31, 2014
(Proforma)
Revenues (Rs. in million)¹ 117,395 18,636
EBIDTA % 19.5% 16.1%
Shareholder Funds (Rs. in million)² 58,603 10,635
Net Debt (Rs. in million)² 23,628 5,364
Net Debt Equity Ratio 0.40 0.50
¹ India seed revenue included in Advanta
² Outstanding FCCB's fully converted
Merger Rationale
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Merger – Why now?
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EXPONENTIAL GROWTH
• in line with global
trend
• newer geographies +
cross selling
opportunities
• proprietary access to
distributors and early
engagement with
farmers
• competitive cost
structure
Proprietary product access• Germplasm• Molecular marker and
Disease resistance technology
Strong R&D
Higher customer intimacy
Greater financial bandwidth
Talent and international experience
Low-cost entry to markets
Wider geographical presence
Seeds - future of agriculture value
78%
87%
77%
32%
33%
94%
94%
100%
89%
22%
13%
21%
68%
67%
6%
6%
11%
Syngenta
Bayer
Dow
Monsanto
Dupont
Adama
Nufarm
FMC
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Strategy In-Line with Global Business Models
* UPL figures are for FY ended March 31, 2015
FY 2014
Most crop
protection
players have a
sizeable
presence in
seeds
Agchem Seeds
Collaborative Research &
Development
•Both teams to develop seeds and formulations that complement each other
Merger strengthens UPL – Portfolio, R&D,Farmer Engagement
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Value Drivers
……… access to Advanta’s crop portfolio(Figures in brackets indicate market size of crop protection chemicals in the respective region / country)
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• Vegetables (USD 269 mn)
• Forages
• Sunflower (USD 418 mn)
• Sorghum• Forages
• Sorghum• Corn (USD 300 mn)• Sunflower (USD 64 mn)• Canola• Forages
• Soybeans (USD 6,000 mn)• Corn (USD 1,095 mn)
• Sorghum• Corn (USD 826 mn)• Vegetables (USD 3,229 mn)• Canola
• Sorghum• Corn (USD 2 mn)• Canola• Wheat
• Sorghum• Canola• Vegetables (USD 262 mn)
Synergies from Merger
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•Higher gross margins of seeds business to support UPL’smargin growth
Margin Accretive
• Integration of administrative and back-office functionsCost Savings
•Better working capital management and improved terms ofcredit
Economical Terms of Finance
•Effective April 2016, move to IFRS (Ind-AS) mandatesConsolidation of Advanta with UPL due to ‘De facto control’
•Merger prior to April 2016 will result in Goodwill recognitionand thereby optimize tax on its amortization
Accounting and Taxation
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Presence Across Entire Agri-inputs Value Chain
Increased Geographical
Reach
Improved Customer Access
Greater Focus
Growth Accretive
Sustainable Growth
Value Accretion
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Presence Across Entire Value Chain
• End-to-end presence across entire agri-inputs value chain: seeds to post-
harvest chemicals
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Seeds + Crop Protection Chemicals Post Harvest
Increased Geographical Reach
• 6 countries
• Strong presence in
Asia Pacific
• Increased access to
important countries
(e.g: Brazil,
Americas)
• Combined entity brings greater balance to geographic mix
• Leverage distribution, brand, penetration
• 40 countries
• Strong presence in
Europe and America
• Enhanced portfolio/
presence (e.g:
Australia, Thailand)
North America19%
Latam28%
Europe15%
India20%
RoW19%
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Note: Regional ratios (%) represent combined revenue mix of UPL Limited (Fiscal year 2015) and Advanta Limited (CY 2014)
Balanced geographical mix
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Customer Intimacy
Technology Differentiation
Seeds• Low capital• Higher R&D spend• Long gestation• Proprietary products
Superior technology differentiation
Better customer access
Crop Protection• High capital• Lower R&D spend• Short gestation• Generic products
+
Convergence leading to sustainable growth
Improved Access – Value Convergence3
• Continue investment in breeding and technology
• Geographic expansion and collaborations
• Product range enhancement
• Gain access to varied germplasm
• Increased share of innovative and differentiated products
• Sustainable technologies
• Enhanced farmer engagement
• Focus on Brazil, India, Africa, China
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Poised for Exponential Growth
Greater Focus4
• Proprietary product portfolio
• Seed coating business
• End-to-end solutions encompassing Seeds, Crop Protection and Post Harvest
• Top management focus and support
• Balance sheet support
• Lower cost to market
Greater Focus
• Complete crop solutions
• Early and direct customer engagement
• Specialized offerings by seed and crop protection teams
Customer Access
• Leverage channel capabilities
• Enhanced coverage in existing markets
• Access to newer territories
Geographical Presence
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Value Acceleration
Product Portfolio
Accelerated Growth
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C
G&A
~ USD 6 mn
Finance Cost ¹
~ USD 4 mn
Tax 2
~ USD 4 mn
Annual cost savings of ~ USD 14 m
Integration of crop protection and
seed business will provide
accelerated growth opportunities
for both the businesses
Merger Value Equation
Integrated model¹ successfully tested in India
with crop protection business growing 3.9x and
seed business 2.3x (2015 over 2008)
¹ Sales and marketing teams of crop protection and seedbusiness are independent
¹ Finance Cost savings of Advanta debt are computed based on interest rates applicable to UPL debt.
2 Savings in taxes are all outside of India.
Next Steps
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Expected Transaction Time Table
Event Timeline
Approval by Boards of both companies and announcement
BSE and NSE approval sought
BSE and NSE approval
Competition Commission approval sought
Application to Jurisdictional High Court
Competition Commission approval
Scheme documents posted to shareholders of both companies
UPL – Shareholders and Creditors Meetings
Advanta – Shareholders and Creditors Meetings
High Court approval
Other required approvals
Transaction completion
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5 to 6 months
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Advisors
Independent Valuation
• BSR & Associates LLP
Fairness Opinion to UPL
• Citigroup Global Markets India Private Limited
Fairness Opinion to Advanta
• Kotak Mahindra Capital Company Limited
Legal Advisor
• J. Sagar Associates
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DisclaimerThis presentation has been prepared by UPL Limited (the “Company”) solely for information purposes without any regard to any specificobjectives, financial situations or informational needs of any particular person. This presentation may not be copied, distributed ordisseminated, directly or indirectly, in any manner. By reviewing this presentation, you agree to be bound by the trailing restrictionsregarding the information disclosed in these materials.
This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding theintent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financialcondition of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,”“projects,” or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risksand uncertainties, and actual results may differ from those in such forward-looking statements as a result of various factors and assumptionswhich the Company believes to be reasonable in light of its operating experience in recent years. The risks and uncertainties relating to thesestatements include, but not limited to, risks and uncertainties, regarding fluctuations in earnings, our ability to manage growth, competition,our ability to manage our international operations, government policies, regulations etc. The Company does not undertake any obligation torevise or update any forward-looking statement that may be made from time to time by or on behalf of the Company. Given these risks,uncertainties and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements.
No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, theaccuracy, completeness, correctness or fairness of the information, estimates, projections and opinions contained in this presentation.Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information contained in thispresentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. Suchinformation and opinions are in all events not current after the date of this presentation. Further, past performance is not necessarilyindicative of future results. Any opinions expressed in this presentation or the contents of this presentation are subject to change withoutnotice. This presentation should not be construed as legal, tax, investment or other advice.
None of the Company, any placement agent, promoters or any other persons that may participate in the offering of any securities of theCompany shall have any responsibility or liability whatsoever for any loss howsoever arising from this presentation or its contents orotherwise arising in connection therewith.
This presentation and its contents are confidential and should not be distributed, published or reproduced, in whole or part, or disclosed byrecipients directly or indirectly to any other person.
This presentation does not constitute or form part of and should not be construed as, directly or indirectly, any offer or invitation orinducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company by any person in anyjurisdiction, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any investmentdecision or any contract or commitment therefore. Securities of the Company may not be offered or sold in the United States absentregistration or an applicable exemption from registration under the United States Securities Act of 1933, as amended.
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Thank You
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