Universal Leaf Tobacco Co. of Richmond, Virginia's largest independent tobacco processor, and the Royster Co., a large fertilizer firm based in Norfolk, have agreed in principle to a merger of Royster into Universal Leaf.
"We have been in a diversifying mode for some time," said Universal Leaf Treasurer Kemp Dozier. The tobacco processor was looking for a firm that was rather large, had an ongoing management team and was in the agriculture field, Dozier said.
"We're very large internationally and they're entering the export markets," Dozier added.
About 40 percent of Universal Leaf's $950 million in annual sales, involved international business, Dozier said. Royster's annual sales last year were about $350 million, Dozier said.
Universal leaf buys tobacco from the marketplace, processes it and sells it. It doesn't make consumer products such as cigarettes, Dozier said.The Royster Co. manufactures and markets phosphate fertilizer materials in the Southeast, and other nutrients for domestic and dinternational markets, Dozier said.
Under the tentative agreement, each share of Royster's common stock would be exchanged for $16 cash or a combination of cash and notes totaling $15.25, Universal Leaf said. The package would consist of $3.04 cash and $12.21 principal amount of 9 percent installments during the second and fourth years after issuance.
The merger is conditional, however, upon 4.7 million shares, or about 66 percent, of Royster common stock deciding to take the note package.
Universal leaf already has agreed to purchase 3.4 million Royster shares or about 47 percent in exchange for the note package. Royster said that it expected a sufficient number of its shareholders to elect the installment note package for its common stock.