Four years after agrochemicals company UPL roped in buyout major TPG and UAE sovereign wealth fund Abu Dhabi Investment Authority to finance a multi-billion-dollar acquisition, it has now embarked on a group restructuring program that would see it bringing in another set of private equity firms to all its three key operating units.
While the group is spinning out the entire India and international seeds business and has attracted investment from KKR for the unit, Advanta, it is separately bringing in existing backers ADIA and TPG as well as Canada’s Brookfield to pump in fresh money in its agritech platform.
UPL said ADIA, Brookfield and TPG will invest Rs 1,580 crore (just under $200 million) for a 9.09% stake in UPL Sustainable Agri Solutions Ltd (UPL SAS) – its India agritech platform — at an equity valuation of Rs 17,380 crore ($2.2 billion).
The agritech platform will include the India crop protection business among other units: SWAL, Adarsh Farm Services and the Nurture digital platform. This business had revenues of Rs 3,894 crore with adjusted EBITDA of Rs 649 crore in FY22.
At the same time, ADIA and TPG–which had picked up a combined 22.2% stake in its unit UPL Corporation for $600 million each to part finance the $4.2 billion acquisition of Arysta LifeScience in 2018-19–will buy the same amount of stake in a newly restructured Cayman Island unit housing the global crop protection business (excluding India).
This global crop protection unit had revenues of $5.12 billion and EBITDA $1 billion last year.
ADIA and TPG will, simultaneously, exit the non-crop protection business of UPL, i.e., the international seeds business and other global non-crop protection businesses (Decco, Animal Health and Health & Nutrition) for $241 million.
Meanwhile, the other global non-crop protection businesses will continue to be owned by UPL Corp.
The main listed holding company will retain the manufacturing & specialty chemicals platform. This business had revenues of Rs 14,574 crore with EBITDA of Rs 1,310 crore in FY22.
The seed business being backed by KKR had revenues of Rs 2,832 crore with EBITDA of Rs 699 crore last year.
Inflow received from sale of minority stakes in UPL SAS and Advanta will be partly used to repay debt.
Given that part of the $500 million fresh PE infusion will be used to pay TPG and ADIA for divestment of part of the business they currently own, UPL as a group will see net infusion of around $259 million, back of the envelope calculations suggest.
UPL said the move will create distinct ‘pure-play’ business platforms – to drive growth potential for each of them through enhanced focus (led by specialised and dedicated teams) and efficient deployment of resources. The realignment will unlock value for UPL shareholders by facilitating ‘fair value recognition’ of the ‘distinct pure-play platforms.’
Jai Shroff, Global CEO of UPL, said, “Our commitment to transform the global food value chain will now receive even more impetus with the creation of these distinct pure-play platforms. This shall enable to bring in enhanced focus, ensure better allocation & utilization of resources and outcome-oriented solutions to farmers.”
In addition, it will enable ‘fair value recognition’ of each platform with investments from distinct marquee global investors resulting in significant unlocking of value for UPL’s existing shareholders, he added.
It expects the corporate realignment exercise to complete over the course of next 45-90 days.