Adama IPO in U.S. Put on Ice

Agrochemical producer blames ‘adverse equity market conditions’ for decision to delay.

Adama Agricultural Solutions, the Israel-based agricultural chemical producer formerly known as Makhteshim Agan, announced on Thursday that it had postponed an initial public offering of ordinary shares due to what the company called “adverse equity market conditions.”

The company, which had expected to list the shares on the New York Stock Exchange, said it would reconsider the timing of the IPO “as market conditions develop.” At a news conference on Thursday, Adama’s CEO Chen Lichtenstein said the IPO was halted because the company was not willing to lower the range at which the shares were being offered.

Lichtenstein and Adama’s vice-chairman of the board, Ami Erel, denied emphatically that there were differences between the two current shareholders in Adama – ChemChina, which owns a 60% stake in the company and the Israeli IDB group company Discount Investment Corp., which holds the remaining 40%. Discount Investment shares tumbled 9.3% in trading on the Tel Aviv Stock Exchange on Thursday.

Observers expressed belief that there had been differences between the two shareholder companies over the suggestion by underwriters that Adama shares be offered at less than the $16 to $18 range, maintaining that range would have given the company a market cap of $2.5 billion to $2.9 billion.

Lichtenstein and Erel insisted that ChemChina and Discount Investment were in full agreement with respect to the IPO, and concurred that Adama’s shares should not be offered for less than that range. This assertion came despite reports that ChemChina had been willing to issue the shares in the $12 to $14 range.

“Investor sentiment toward companies that cater to the agricultural industry is pretty negative right now,” Matt Arnold, a St. Louis-based analyst with Edward Jones, told the Bloomberg news service regarding the failure of the Adama IPO to proceed at this time. “These stocks can’t find a friend right now.”

Adama, which is based at Airport City near Ben-Gurion International Airport, had planned to use proceeds from the IPO to fund the acquisition of companies from ChemChina, which is formally known as the China National Chemical Corporation.

Lichtenstein denied talk in the capital markets that the IPO failed because foreign investors were not enamored that almost all the proceeds from the IPO were to be directed to Adama’s controlling shareholder. Instead, he said investors had expected an additional reduction in Adama’s share price due to the decline in agricultural commodity prices and the prices at which other producers of pesticides have been trading publicly. This in turn has raised concerns regarding the state of companies in this business sector.