Origin Agritech acquires agrochemical company Shandong Kunfeng Biochemical
Jun. 4, 2010
Origin Agritech Limited (NASDAQ: SEED) (“Origin” or the “Company”), a vertically–integrated supplier of hybrid and genetically-modified crop seeds in China, announced it has acquired a 80.0% ownership stake in Shandong Kunfeng Biochemical Limited, a agricultural chemical producer in Shandong, China, for RMB 14.96M. The acquisition is a continuance of Origin’s corporate strategy to maximize its portfolio and focus on markets and segments where full synergies can be realized.
Following Origin’s divestiture of its minority stake in Biocentury Transgene, the company will utilize proceeds to invest in the developing agro-chemical industry. The chemical products are not only compatible with the genetically-modified (GM) crop seed products, but allow for significant cross-selling potential through Origin’s existing nationwide distributor network to 200 million small farms in China. The current global agro-chemical industry is roughly US $275 billion while the domestic Chinese market presents about US $13 billion market potential.
＂We believe this quality and accretive acquisition will increase our ability to penetrate a market space toward a clear, focused strategic path for our company and shareholders,” said Dr. Gengchen Han, Founder and Chairman for Origin. “Not only are the products compatible and able to work together to bring more value to the farmer, but we are able to cross-sell these products using our existing distribution network.”
Some of the company’s core products include glyphosate and paraquat which possess significant potential in the domestic market. Additionally, the production facilities are housed in a national chemical industrial park providing reliable system to efficiently scale the transport and use of raw materials. Origin continues to seek out and invest in attractive opportunities in domestic China and other areas.
＂In addition to reducing seasonality and allowing better returns on our capital, we believe this has the potential to add RMB 50 to 60 million to our revenues in FY 2011." said Irving Kau, Origin’s Acting Chief Financial Officer. “With proper marketing and planning, we expect potentially 70 products with 3 government certificates by the end of 2013, including 40 herbicide products, 15 insecticides and 10 bactericide products.”
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