ICL To Form JV, Acquire Stake In China's Yunnan Yuntianhua

(RTTNews) - Specialty minerals company Israel Chemicals Ltd. or ICL (ICL) said Tuesday that under a strategic alliance, it will form a joint venture with China's state-owned Yunnan Yuntianhua Group Co. Ltd. and also acquire a 15 percent stake in the Chinese chemicals company. The actions as part of ICL's efforts to bolster its global phosphate business.

Israel-based ICL said it will invest up to $500 million in the strategic alliance for 50 percent ownership of the joint venture that will operate a fully integrated phosphate business in China, and also acquire a 15 percent strategic holding in Yunnan Yuntianhua, China's second-largest chemicals maker.

ICL said that the transaction with Yunnan Yuntianhua represents the next significant execution step of its "Next Step Forward" strategy. The company noted that the transaction will increase its phosphate platform by more than 50 percent and expand its phosphate end-to-end business model across other attractive geographies.

According to ICL, the major thrust of the JV's strategy will be the transformation from a commodity fertilizer company to a specialty player in agriculture, food ingredients and engineered materials.

ICL said that $269 million of its 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. The newly-issued shares will represent 15 percent of Yunnan Yuntianhua's equity following their issuance to ICL, and will be locked up for a period of three years.

The issuance of the shares will make ICL the largest private shareholder in Yunnan Yuntianhua and also entitle the company 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.

Yunnan Yuntianhua, with about $9 billion in annual revenues, is one of China's leading chemical companies with a strategic focus on the phosphate value chain.

The joint venture will include a mine that produces about 2.5 million tonnes of phosphate rock annually for the next 30 years, an integrated world-scale downstream phosphate operation, and a marketing and sales organization that primarily serves the Chinese and the Asian markets.

ICL said it will nominate the joint venture's CEO, COO and a VP Sales & Marketing, while Yunnan Yuntianhua will nominate the JV's CFO and VP HR.

ICL will lead the operations of the business and merge its 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.

ICL noted that the transaction will be cash earnings per share accretive for the company from the first full year of operations. The transaction is expected to close in the first quarter of 2016.

In a separate statement, ICL Industrial Products or ICL IP, a segment of ICL, said it has raised the prices by 5 percent to 10 percent for selected phosphorus-based Fyrol flame retardants manufactured by the company. The price increases are effective immediately, or as contracts with customers permit, the company noted.

ICL IP recently announced restructuring plans for the purpose of reducing its overall costs and to improve its competitive position and maintain its high level of customer service.

ICL closed Monday's trading at $7.12, up $0.01 on a volume of 493,700 shares.