Mangalore Chemicals announces merger with Paradeep Phosphates, arbitrage implies 18% upside

Mangalore Chemicals and Fertilisers Ltd (MCFL) has announced a merger with Paradeep Phosphates Ltd (PPL) to become one of the largest integrated private sector fertiliser companies in India with a total manufacturing capacity of 3.6 Million Metric Tonnes Per Annum (MMTPA).

The board of directors of Mangalore Chemicals and Paradeep Phosphates have approved a composite scheme of arrangement for the merger of both the companies. Investors will get 187 shares of Paradeep Phosphates for every 100 equity shares of Mangalore Chemicals. The swap ratio implies an upside potential of 18%.

The new shares of Paradeep Phosphates so issued to the shareholders of Mangalore Chemicals will be listed on both the NSE and the BSE.

“This proposed merger transaction aims at taking their respective businesses to the next level of growth by consolidating the business operations of both the companies to become a larger entity,” Paradeep Phosphates said in an exchange filing.

Mangalore Chemicals has a significant presence in the Southern regions of India while Paradeep Phosphates has strong presence in the Northern, Central and Eastern parts of India, thus making the proposed combined entity a pan-Indian fertiliser company.

“This move aims to enhance customer engagement, improve large deal capabilities, use manufacturing capabilities of both entities, reap benefits of economies of scale, optimise supply chain and thus create a more compelling value proposition for all stakeholders,” it said.

Mangalore Chemicals and Paradeep Phosphates have consistently delivered robust financial performances and by combining, they aim to amplify shareholder value.

Mangalore Chemicals and Paradeep Phosphates have formed a merger implementation committee to oversee the merger process, including discussions with regulators, smooth transition for employees, customers, vendors and other external stakeholders.

Speaking about the merger, Suresh Krishnan, Managing Director and Chief Executive Officer of PPL said, “Consolidation of PPL and MCFL will mark a significant leap forward in our growth strategy and the resultant entity will be able to cater to the diverse soil needs of the country. We will be able to reap benefits of economies of scale, optimize product mix, enhance distribution reach and supply chain capabilities and leverage on each other potent synergies. This will result in unlocking tremendous value and drive sustainable growth for our shareholders, employees, and partners.”

Speaking about the merger, Nitin Kantak, Whole-time Director of MCFL said: “The proposed merger will enable us to become a larger player and will help us to serve our market in a more diversified manner and will result in enhanced value creation for all the stakeholders.”