TEL AVIV, Israel, Dec. 16, 2014 /PRNewswire/ -- ICL
(NYSE and TASE: ICL), a global manufacturer of products
based on specialty minerals that fulfill essential needs of the
world's growing population in the agriculture, processed food and
engineered materials markets announced a major strategic
cooperation agreement with Yunnan Yuntianhua Group Co. Ltd., a
Chinese government-owned company that is China's second largest chemicals manufacturer
with large scale phosphate mines and a manufacturer of fertilizers
and downstream products derived from phosphates.
Description of the Transaction
ICL will invest up to $500 million
in its strategic alliance with Yunnan Yuntianhua which will include
a) the creation of a new joint venture company in which ICL will
have 50% ownership and which will operate an integrated,
world-scale phosphate platform across the value chain and b) a
strategic holding in Yunnan Yuntianhua, China's leading producer of phosphate rock and
fertilizers, as detailed below:
The joint venture will include the following assets:
- A world-scale phosphate rock mine, currently operated by Yunnan
Yuntianhua, that produces approximately 2.5 million tonnes of
phosphate annually, and which will become the JV's full backward
integration as a competitive phosphate platform.
- An integrated, world-scale phosphate operation with annual
capacity of approximately 1,850,000 tonnes of sulfuric acid,
700,000 tonnes of phosphoric acid, 850,000 tonnes of fertilizers,
60,000 tonnes of purified phosphoric acid, 120,000 tonnes of
specialty fertilizers and 65,000 tonnes of specialty phosphates for
the food and engineered materials markets.
ICL will nominate the joint venture's CEO, COO and a VP Sales
& Marketing, whereas Yunnan Yuntianhua will nominate the JV's
CFO and VP HR. ICL will lead the operations of the business and
merge ICL's existing businesses in China into this entity, which will be fully
integrated into ICL's global businesses. The JV will be transformed
into a fully operating business unit, including product
development, production and sales & marketing.
In order to strengthen the strategic partnership between ICL
Yunnan Yuntianhua and to create additional value for their
respective shareholders, $269 million
of ICL's investment will be used to acquire a strategic holding in
Yunnan Yuntianhua, a subsidiary of Yuntianhua Group that is listed
on the Shanghai Stock Exchange (600096: Shanghai). The newly-issued shares will
represent 15% of Yunnan Yuntianhua's equity following their
issuance to ICL. Yunnan Yuntianhua is one of China's leading chemical companies with a
strategic focus on the phosphate value chain and a strong advantage
in mineral resources, providing high-quality products and services
across the agriculture and engineered materials industries
with approximately $9 billion in
annual revenues. The issuance of the shares will make ICL Yunnan
Yuntianhua's largest private shareholder and will entitle ICL to
nominate two members of Yunnan Yuntianhua's Board of Directors and
a vice president of Yunnan Yuntianhua, as well as a vice president
for two of its subsidiaries. The shares will be purchased by ICL
for RMB 8.24 per share, a 10%
discount from Yunnan Yuntianhua's average share price over the
twenty trading days before November 25,
2014. The shares will be locked up for a period of three
years, demonstrating ICL's long-term commitment to a long-term
alliance with Yunnan Yuntianhua. ICL intends to become an active,
value creating shareholder of Yunnan
Yuntianhua.
For ICL, the transaction will be cash EPS accretive for ICL from
the first full year of operations with aggregate EV/EBITDA ratio of
7.4 based on second year projections.
The transaction is expected to close in Q1 2016, subject to
closing conditions which include government approvals.
Strategic Rationale for the Transaction
ICL's transaction with Yunnan Yuntianhua represents the next
significant execution step of ICL's "Next Step Forward"
strategy. It will increase ICL's phosphate platform by more than
50% and expand its phosphate end-to-end business model across other
attractive geographies by creating a demand pool via the specialty
downstream markets. This timely transaction will enable ICL to take
advantage of current low phosphate prices to secure long-term
reserves and market share in growth markets.
ICL's phosphate business is focused on fulfilling essential
needs in agriculture (commodity and specialty fertilizers), food
(texture and stabilization of processed foods) and engineered
materials (for industrial markets). Beginning from a competitive
rock-mineral basis, 75% of the phosphate products of ICL's
phosphate business unit (headquartered in Rotem, Israel) are sold via a fully integrated value
chain from bulk fertilizers all the way downstream into specialty
applications. Through this transaction, this business unit will
further strengthen its position as the leading global
backward-integrated phosphate player with the largest downstream
products specialty portfolio.
ICL is entering into this comprehensive, broad and long-term
strategic alliance with Yunnan Yuntianhua in order to transfer the
successful business model it has developed over the past several
decades into the faster growing Asian and Chinese markets. It
intends to adapt to Asian market conditions by combining ICL's
highly developed specialty phosphates know-how in production and
marketing with Yunnan Yuntianhua's strong backward integration and
scale. Additional benefit will come from ICL's opportunity to
balance its global supply chain from two integrated sites, one in
Israel and the other in
China, in order to better serve
its customers in Europe, the
Americas and Asia, and thereby
generate supply chain and capex synergies.
Competitive Features and Benefits of the Transaction
- ICL will become a joint venture partner with Yunnan Yuntianhua,
China's largest fertilizer
producer on an operational level, and as a strategic partner, on
the corporate level.
- Through this transaction, ICL will gain the ability to build a
second fully backward integrated specialty phosphates platform with
above-average profitability and operate it seamlessly with its
Israeli and global business units in Germany, Holland and the US.
- The transaction will strengthen the cost competitiveness of
ICL's phosphate operations with access to a low-cost phosphate rock
operation with vast reserves, as well as with low-cost phosphoric
acid.
- The transaction almost doubles ICL's global phosphate market
share as it becomes a new major player in China's and Asia's fast-growing specialty market for
fertilizers, food ingredients and engineered materials.
- These additional resources, coupled with ICL's approximately
$2 billion existing specialty
phosphates business in Europe,
North America and Brazil with its product expertise and brand
name, will enable it to build world scale, diverse and competitive
specialty operations for three of its target markets: China, SE
Asia and India. It will
also contribute to ICL's already established position in
Brazil. The deal will allow ICL to
provide better and more comprehensive service to its
customers.
- ICL has identified significant expansion and synergy
opportunities: upgrading and expanding purified phosphoric acid
production facilities, expanding downstream operations by utilizing
ICL's know-how; offering higher value added products such as
specialty water soluble MAP, specialty phosphate salts for food and
engineered materials, as well as formulations in the specialty
non-agricultural market; expanding bulk fertilizers production
(GMAP, GTSP) via debottlenecking; and improving utilization and
processes. As a result, revenues are expected to grow from
approximately $500 million annually
to over $700 million over a period of
five years. In addition, ICL sees potential margin expansion via
marketing differentiation and reduction of production costs.
- The partners will establish a joint phosphate R&D platform
in Kunming (Yunnan province) which
will focus on product development for the Asian markets, as well as
on process technologies for the phosphate operations.
- The strategic alliance between ICL and Yunnan Yuntianhua can
support ICL's potash business in China over the long term.
- ICL will actively support Yunnan Yuntianhua's management with
expertise, know-how and human resources for a newly created
'Phosphate Committee' which will report to Yunnan Yuntianhua's
board of directors. The Committee will be designed to optimize the
company's operations, commercial activities and financial structure
in order to create shareholder value.
Commenting on the news, Mr. Ta Shenghua, Chairman of Yunnan
Yuntianhua, stated, "We are pleased to enter into a strategic
relationship with ICL, a global industry leader with unique
know-how and expertise in developing and producing phosphate-based
downstream products for the agriculture, food and engineered
materials markets. Our respective positions in the global
phosphates market will benefit from integrating Yunnan Yuntianhua's
infrastructure and large-scale raw material reserves with ICL's
broad know-how, unique technologies and proven expertise, and will
enable us to conduct activities along the entire value chain - from
mining to manufacturing downstream products. No other company in
the world currently does this. We believe that together Yunnan
Yuntianhua and ICL can make an important contribution to Chinese
society and industry."
Stefan Borgas, CEO of ICL, added,
"Our agreement with Yunnan Yuntianhua fulfills our strategic
objectives. It will enable us to double our phosphates business and
transform ICL from a smaller and regional player in the phosphates
industry into a global leader with access to competitive phosphate
reserves suitable for each market. As a result of this agreement,
we will also transform our unique knowledge, technological
capabilities and unparalleled expertise into an important growth
contributor for ICL. Our cooperation with Yunnan Yuntianhua fits
ICL's strategy to provide for the evolving essential needs of
China's growing population. Our
penetration into the Chinese market is also an important business
objective for ICL. The partnership with Yunnan Yuntianhua will not
only result in supplying phosphate fertilizers to China's fast developing agricultural market,
but is also important for the food market which is undergoing major
changes in light of growing consumption of processed
foods."
Nir Gilad, Chairman of ICL's
Board of Directors, commented, "ICL's strategic deal with Yunnan
Yuntianhua marks another important milestone in the execution of
its strategy, and it joins other accomplishments achieved by ICL
over the past year including securing other raw material sources
outside of Israel (potash in
Spain and Ethiopia), laying a strategic foundation for
activities in major growth markets (China, Africa
and Brazil), focusing on its core
businesses in food, agriculture and engineered materials by
divesting non-core assets, establishing a significant platform in
large, growing markets (China, Brasil, Africa) and implementing a company-wide
efficiency plan. ICL continues to actively seek additional
strategic growth opportunities, especially outside of Israel."
Conference Call
ICL will hold a conference call for analysts on Tuesday, December 16, 2014 at 8:00AM EST during which Stefan Borgas, ICL's President & CEO, joined
by additional ICL executives, will discuss ICL's strategic alliance
with Yunnan Yuntianhua. To join the conference call, please call
one of the access numbers listed below a few minutes before
8:00AM EST (1:00PM London
time, 3:00PM Israel time) on Tuesday, December 16, 2014, and ask for the ICL
Analyst Call.
North America
(toll free): 1-877-407-0789
or (toll/international):
1-201-689-8562
Israel and
International (toll-free) 1 809 406 247
UK (toll free): 0 800 756 3429
A live webcast may also be viewed from our website located at
www.icl-group.com.
About ICL
ICL is a global manufacturer of products based on specialty
minerals that fulfill humanity's essential needs primarily in three
markets: agriculture, food and engineered materials. The
agricultural products that ICL produces help to feed the world's
growing population. The potash and phosphates that it mines and
manufactures are used as ingredients in fertilizers and serve as an
essential component in the pharmaceutical and food additives
industries. The food additives that ICL produces enable people to
have greater access to more varied and higher quality food. ICL's
water treatment products supply clean water to millions of people,
as well as to industry around the world. Other substances, based on
bromine and phosphates help to create energy that is more efficient
and environmentally friendly, prevent the spread of forest fires
and allow the safe and widespread use of a variety of products and
materials.
ICL benefits from a broad presence throughout the world and
proximity to large markets, including in emerging regions. ICL
operates within a strategic framework of sustainability that
includes a commitment to the environment, support of communities in
which ICL's manufacturing operations are located and where its
employees live, and a commitment to all its employees, customers,
suppliers and other stakeholders.
ICL is a public company whose shares are dual listed on the New
York Stock Exchange and the Tel Aviv Stock Exchange (NYSE and TASE:
ICL). The company employs approximately 12,000 people worldwide,
and its sales in 2013 totaled US$6.3
billion. For more information, visit the company's website
at www.icl-group.com
Forward Looking Statement.
This press release contains forward-looking assessments and
judgments regarding macro-economic conditions and the Group's
markets, and there is no certainty as to whether, when and/or at
what rate these projections will materialize. Management's
projections are likely to change in light of market fluctuations,
especially in ICL's manufacturing locations and target
markets. In addition, ICL is likely to be affected by changes
in the demand and price environment for its products as well as the
cost of shipping and energy, whether caused by actions of
governments, manufacturers or consumers. ICL can also be affected
by changes in the capital markets, including fluctuations in
currency exchange rates, credit availability, interest rates,
etc.
PRESS
CONTACT
|
INVESTOR RELATIONS
CONTACT
|
Amiram
Fleisher
|
Limor
Gruber
|
Fleisher
Communications
|
Head of Investor
Relations, ICL
|
+972-3-6241241
|
+972-3-684-4471
|
amiram@fleisher-pr.com
|
Limor.Gruber@icl-group.com
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/icl-makes-a-step-change-in-its-global-phosphate-business-by-forming-a-strategic-alliance-with-chinas-yunnan-yuntianhua-300010352.html
SOURCE ICL