Dec. 21, 2017
By Gil Gullickson, Agriculture.com
Mergers and acquisitions picked up in the agricultural arena in 2017.
The Big Six in the agricultural seed, chemical, and traits area – BASF, Monsanto, Bayer, Dow, Syngenta, and DuPont – are rapidly becoming the big four—BASF, Bayer-Monsanto, DowDuPont, and ChemChina-Syngenta. Acquisitions also took place in the machinery arena with AGCO’s purchase of Precision Planting. Ditto for data, as evidenced by DowDuPont’s purchase of Granular. It’s even happened on the farmer level as some farmer-owned cooperatives merged.
Current conditions mimic 1999, when Novartis and AstraZeneca merged and subsequently spun off their agricultural enterprises into Syngenta. Remember American Cyanamid? This now-forgotten agricultural chemical company – once an industry kingpin – was bought by BASF in 2000.
Like now, farmers then were struggling with low commodity prices. When business cycles start bottoming out, mergers and acquisitions allow firms to enhance efficiencies.
On the other hand, resulting industry concentration leaves numerous concerns that fewer players will mean less farmer choice when it comes to products. A group called Farmers and Families First published a white paper this month critical of Bayer AG's acquistion of Monsanto.
Concerns raised include the following:
1. The Bayer-Monsanto merger would raise seed prices for farmers through market integration and anticompetition tactics.
2. The merger is projected to raise aggregate seed prices by 5.5% but could raise cottonseed prices by more than 20%.
3. Monsanto’s decade-long collaboration with BASF raises serious questions about Bayer’s divestiture of its seed and herbicide assets, and whether divestiture would actually enhance Monsanto’s control of global markets.
4. On average, farmers using Monsanto brand cottonseed will see their seed prices increase by 19.23%, while farmers using Bayer brand cottonseed will see their seed prices increase by 17.41%
On the other hand, competition still exists in this arena, says Mark Gulley with Gulley & Associates LLC in New York City. “One executive once told me, “people view this (ag seed-chemical) market as an oligopoly (a market structure in which a few firms dominate). If that’s the case, why are we beating each other’s brains out (for business)?’” Gulley recalls.
With high gross margins, Gulley notes there are substantial financial incentives for these firms to compete for farmers’ business. Steps like mergers also afford companies the R&D (research and development) they could not otherwise do as separate entities, he adds.
There are more players across agriculture than ever, Gulley notes. Hundreds of start-ups have annually entered the agricultural space. Investment in agricultural technology investment over the last three years is estimated at $10 billion. Even among big players, plenty of collaboration between parties will occur and will not change the need for innovation investments, Gulley believes.
That said, here are 10 mergers and purchases that were either finalized or initiated in 2017.
This “merger of equals” closed last September. Now known as DowDuPont, the firm has three companies consisting of:
■ Materials Science
■ Specialty Products
The agricultural company incorporates DuPont Pioneer, DuPont Crop Protection, Dow AgroSciences into a single entity. Plans are to headquarter the company in Wilmington, Delaware, with global business centers in Johnston, Iowa, and Indianapolis, Indiana.
To garner the approval of U.S. and foreign regulators, DuPont had to divest parts of its crop protection portfolio to resolve concerns that the deal would stifle competition and raise prices for consumers.
This resulted in FMC buying DuPont’s global chewing pest insecticide portfolio, its global cereal broadleaf herbicides, and a substantial portion of DuPont’s global crop protection R&D capabilities. After closing of the acquisition, FMC Agricultural Solutions will become the fifth-largest crop protection chemical company in the world by revenue, with estimated annual revenue of approximately $3.8 billion.
Meanwhile, DuPont bought FMC Health and Nutrition and will also receive $1.2 billion in cash as part of the deal.
2. BAYER AND MONSANTO
If there was any masking a sense of urgency regarding Bayer’s $66 billion purchase of Monsanto, it was dropped a year ago in December. That’s when Bayer AG CEO Werner Baumann and Monsanto CEO Hugh Grant met with then President-elect Donald Trump even before Trump had named a USDA secretary.
Monsanto’s seeds and traits business is what initially attracted Bayer to Monsanto, says Liam Condon, CEO of Bayer CropScience. He says both companies are complementary with each other, with Monsanto being strong in seeds and traits and Bayer being strong in crop protection. “We see a tremendous opportunity to do things in parallel,” he says.
Corn and soybeans are a major emphasis of both Bayer Crop Science and Monsanto, but both also have significant wheat-breeding operations. Condon, though, says there is little overlap between the two wheat businesses because the firms have different approaches.
To head off potential antitrust concerns, though, Bayer sold its LibertyLink technology and other significant parts of Bayer’s seed and nonselective herbicide businesses to BASF.
If the deal does close as anticipated in late January, customers will initially notice little change, says Condon.
“The reality is, to the outside world, not much will change,” says Condon. “The whole integration will take place over time. Customers won’t notice any disruption (on that date) whatsoever.”
For now, there’s no name change, but any such announcement will be made on the day of the close, says Condon.
3. CHEMCHINA COMPLETES SYNGENTA PURCHASE
The Syngenta and ChemChina deal – first announced in February 2016 – was finalized earlier this year.
One factor that makes the Syngenta-ChemChina deal different from others is that ChemChina is a state-owned entity ultimately owned by the Chinese government. ChemChina has been active on the acquisition front in the agricultural chemical space, having bought the Israeli generic agricultural chemical company, Makhteshim Agan Group (now ADAMA Agricultural Solutions), for around $2.4 billion in 2011.
4. AGCO AGREES TO BUY PRECISION PLANTING
Last July, AGCO agreed to buy Precision Planting from The Climate Corporation, a subsidiary of Monsanto. The Climate Corporation’s Climate FieldView digital agriculture platform will retain connectivity with Precision Planting’s 20/20 SeedSense monitor.
“The acquisition of Precision Planting will solidify AGCO as one of the global leaders in planting technology and strengthen our position as a full line partner for professional farmers across the globe,” says Martin Richenhagen, AGCO’s chairman, president, and chief executive officer.
“Our strategy in divesting Precision Planting was to put it in the hands of a mainstream equipment company that saw the value in that and would continue to invest in the company as part of its core business,” says Mike Stern, chief executive officer of The Climate Corporation.
5. DUPONT AGREES TO BUY GRANULAR
DuPont signed an agreement to buy Granular, a software and analytics tools provider that helps farms improve efficiency, profitability, and sustainability. The San Francisco-based company also operates AcreValue.com, which is a digital marketplace for farmland real estate.
This acquisition will enable DuPont to connect growers, analytics, and public and private data to advance its vision for a digitally connected, more sustainable agriculture industry.
“We started Granular to make a big impact on the business of farming,” says Sid Gorham, Granular’s cofounder and CEO. “I am confident that, as part of DuPont, we will make a bigger impact even faster. DuPont shares our vision for using technology to help farms improve their dollar yield, not just their bushel yield. We are excited to pursue that vision together.”
Going forward, Gorham will continue to lead Granular and will also lead digital agriculture for DuPont, which includes responsibility for DuPont’s agronomic software business, Encirca.
Founded in 2014, Granular serves nearly 2 million acres of commodity and specialty crops across the U.S., Canada, and Australia.
6. JOHN DEERE AGREES TO BUY BLUE RIVER TECHNOLOGY
In September, John Deere invested $305 million to fully acquire Blue River Technology. The company, which employs 60 people, will remain in Sunnyvale, California.
Founded in 2011 by Jorge Heraud and Lee Redden, Blue River Technology has designed and integrated computer vision and machine learning technology in lettuce fields, which enables growers to reduce the use of herbicides by spraying only where weeds are present, optimizing the use of inputs. The company is currently testing the technology in cotton fields.
“Blue River is advancing precision agriculture by moving farm-management decisions from the field level to the plant level,” says Jorge Heraud, CEO of Blue River Technology. “We are using computer vision, robotics, and machine learning to help smart machines detect, identify, and make management decisions about every single plant in the field.”
7. SUMITOMO CHEMICAL ACQUIRES BOTANICAL RESOURCES AUSTRALIA
Last November, Sumitomo Chemical, a Japanese chemical firm, acquired 82.9% of shares in Botanical Resources Australia Pty Ltd and its affiliated companies (the BRA Group). The BRA Group is a major supplier of insecticidal compounds pyrethrins, a consolidated subsidiary. Pyrethrins are insecticidal compounds extracted from the pyrethrum flower, which have the same basic chemical structure as synthetic pyrethroids. They are widely and commonly used in insecticides for household, vector control, pest control management, and crop protection.
8. LINAMAR BUYS MACDON
This December, Linamar reached an agreement to buy Winnipeg-based agriculture equipment maker MacDon Industries.
The Guelph, Ontario-based Linamar says MacDon and its group of companies will complement its existing agricultural harvesting business in Hungary and allow the company to serve more markets globally.
Linamar, which makes precision metallic parts for a range of sectors including automobiles, says the MacDon deal will allow it to further diversify its operations and end markets.
Company CEO Linda Hasenfratz said in a company news release says that increased exposure to agriculture comes as the sector is in the early stages of a cyclical recovery, and with strong growth to be driven by a growing and developing global population.
MacDon sells its specialized agricultural harvesting equipment in over 40 countries and has about 1,400 dealers and distributors in its global network.
9. AGLAND AND HERITAGE COOPERATIVES MERGE
Farm cooperatives have followed the same path as mega-giant seed and chemical companies. Last September, Agland Co-op, New Philadelphia, Ohio, and Heritage Cooperative, West Mansfield, Ohio merged. The merger includes more than 30 cooperative locations serving 3,300 grower-members in a 20-county area of central Ohio.
10. WHEAT GROWERS AND NORTH CENTRAL FARMERS ELEVATOR APPROVE MERGER
Meanwhile, shareholders of Wheat Growers, Aberdeen, South Dakota, and North Central Farmers Elevator approved a merger that will be finalized on February 1, 2018. Wheat Growers has 5,100 active member-owners in eastern North Dakota and eastern South Dakota. North Central Farmers Elevator has 22 locations serving more than 2,400 member-owners in north-central South Dakota and south-central North Dakota.