Israel’s Discount Investment Corp. has agreed to sell a 40 percent stake in crop protection maker Adama Agricultural Solutions to China National Chemical Corp. (ChemChina) for US$1.4 billion.
The deal includes debt of US$1.17 billion, Reuters reports.
It paves the way for a merger between Adama, the world’s biggest producer of generic crop protection products, and smaller agrochemical producer Sanonda.
Sanonda is a subsidiary of ChemChina, which already owns 60 percent of Adama.
Discount Investment said in a statement to the Tel Aviv Stock Exchange that in return for the remaining Adama shares, ChemChina would cover a US$1.17 billion loan and pay US$230 million in cash.
Discount said it would report a capital gain of 690 million shekels (US$178.5 million) from the sale.
Discount’s shares surged 24.2 percent in afternoon trading on Sunday to 11.05 shekels.
The deal values Adama’s equity at about US$3.5 billion, Adama said.
It also said the Sanonda transaction could be completed in the first half of 2017.
The proposed merger of Adama and Sanonda, first announced last year, follows a big push among global agrochemicals companies to consolidate, partly in response to a drop in commodity prices that has hit farm incomes.
ChemChina is in the process of acquiring Swiss pesticides and seeds maker Syngenta for US$43 billion but its business is expected to be run separately from Adama.
Adama said its merger plans got a boost when a Chinese agency recently published a proposed amendment to China’s securities regulations that would allow a global entity to be combined with one publicly traded in China. Sanonda is listed on the Shenzhen Stock Exchange.
The proposed merger would speed up Adama’s integration into China and allow it to be floated on the Shenzhen exchange, Adama said.
The combined company will be headquartered in Israel and keep the Adama name and brand, Adama said. It will be run by Adama’s management team, while China will become a significant center for the business.
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