Makhteshim to buy U.S. Albaugh for $1 b

Makhteshim-Agan Industries Ltd., the world’s biggest maker of generic crop chemicals, agreed to buy Albaugh Inc., a privately held supplier of crop protection chemicals, for about $1 billion in cash, notes and stock.

Tel Aviv-based Makhteshim will pay $340 million in cash, $455 million in notes and issue 59 million shares, representing a 12 percent stake in the company, for the Ankeny, Iowa-based company, according to an e-mailed statement yesterday. It also will assume up to $280 million of Albaugh debt, the statement said.

"This is a transformational acquisition for Makhteshim,” said Chief Executive Officer Erez Vigodman in the statement. “It extends our industry leadership to North and South America, giving us the opportunity to participate in fast-growing markets and significantly improving the global balance and diversity of our revenue sources.”

Makhteshim, which posted losses in two of the last three quarters, is looking to boost profit after insecticide prices declined as farmers reduced production amid the global recession, which reduced food demand. Speculation of another merger in the industry increased after Sumitomo Chemical Co. this year bought a 20 percent stake in Nufarm Ltd., Australia’s largest farm chemicals supplier.

Makhteshim shares rose 1.2 percent to close at 13.81 shekels before the announcement. The stock has declined 28 percent over the past year. Shares of Koor Industries Ltd., which owns 44 percent of Makhteshim, according to Bloomberg data, fell 4.6 percent to 70.90 shekels.

"The acquisition is large and should strengthen the company especially in the U.S. as Albaugh is one of the biggest companies in North and South America with a similar sales level as Makhteshim,” IBI analyst Guil Bashan said by telephone. “I hope it will not place a burden on it financially.”

Bashan has a “neutral” recommendation on the shares, according to data compiled by Bloomberg.

The deal, which requires approval from European and U.S. regulators, is likely to close in the fourth quarter and add to adjusted earnings a year later, Makhteshim said.