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UPL acquires 51% equity stake in DVA Agro Do Brazil
United Phosphorus (UPL) has acquired 51% stake in DVA Agro Do Brasil, a Brazilian
company, from DVA Group, Germany, and other shareholders. DVA, which started
operations in 2005, is engaged in the production, marketing and distribution of crop
protection products in Brazil and reported revenue of US$130mn in CY2010.
The acquisition would add value to UPL as it provides the company an access to one of the
largest agrochemical markets LatAm, growing at a ~14% CAGR over CY2007–10. This
acquisition will nearly double UPL's operations in Brazil. The cost of acquisition for the 51%
stake is estimated to be around US$150mn (around 2.3x CY2010 revenue). While the
source of funding is not clear, the company is comfortably sitting on cash of `1,566cr and
Debt:Equity of 0.6x (as on March 2011). Currently, lacking clarity on the profitability of the
acquisition, we are not changing our numbers, but we maintain our estimates. At the CMP,
the stock trades at 10.3x FY2012E and 9.2x FY2013E earnings. We maintain our Buy view
on the stock with a target price of `224.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UPL acquires 51% equity stake in DVA Agro Do Brazil
United Phosphorus (UPL) has acquired 51% stake in DVA Agro Do Brasil, a Brazilian
company, from DVA Group, Germany, and other shareholders. DVA, which started
operations in 2005, is engaged in the production, marketing and distribution of crop
protection products in Brazil and reported revenue of US$130mn in CY2010.
The acquisition would add value to UPL as it provides the company an access to one of the
largest agrochemical markets LatAm, growing at a ~14% CAGR over CY2007–10. This
acquisition will nearly double UPL's operations in Brazil. The cost of acquisition for the 51%
stake is estimated to be around US$150mn (around 2.3x CY2010 revenue). While the
source of funding is not clear, the company is comfortably sitting on cash of `1,566cr and
Debt:Equity of 0.6x (as on March 2011). Currently, lacking clarity on the profitability of the
acquisition, we are not changing our numbers, but we maintain our estimates. At the CMP,
the stock trades at 10.3x FY2012E and 9.2x FY2013E earnings. We maintain our Buy view
on the stock with a target price of `224.
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