Aug. 12, 2019
Marrone Bio Innovations Inc. (NASDAQ: MBII), an international leader in sustainable bioprotection and plant health solutions, announced last week that it has entered into a definitive purchase agreement to acquire Pro Farm Technologies OY, which will increase Marrone Bio’s market share and global platform in the $4.6 billion seed- and soil-treatment market.
With the acquisition of Pro Farm, Marrone Bio will add proprietary nutrient and biostimulant technology and products for seed and foliar treatments to its portfolio. This transaction also will give the company a significant opportunity to leverage an expanded global distribution network for all of MBI’s products. Marrone Bio expects to benefit from partial-year sales in 2019 as a result of the transaction. With historical gross margins significantly higher than Marrone Bio’s current product portfolio average, the Pro Farm acquisition is expected to be accretive to net income and cash flow from operations in 2020.
“This acquisition is an example of the kind of transformative investments that we seek to grow Marrone Bio from a product, crop and geographic perspective, and to do so in a way that can immediately accelerate our revenue growth and margin expansion,” said Marrone Bio Chairman of the Board Bob Woods. “We believe acquisitions like Pro Farm will allow us to cost-effectively expand our global scale, and significantly escalate our growth trajectory.”
Marrone Bio Chief Executive Officer Dr. Pam Marrone added, “Today’s announcement is a critical step in our strategic objective to build a platform company that leverages our scientific, manufacturing and commercial expertise through new agricultural solutions. We believe we have the technology, talent and financial support to achieve our goal of creating a biological ag inputs company of major scope and scale.”
The transaction is expected to close in the third quarter of 2019, subject to satisfaction of customary conditions. Pro Farm is being acquired for an agreed enterprise value of $31.8 million, including a combination of $6.2 million cash and 12.7 million shares of Marrone Bio stock to be paid to Pro Farm’s equity holders, debt holders and advisors upon the closing of the transaction, as well as the opportunity for potential payment of a total of up to $7.5 million of additional shares of stock deliverable from 2021 through 2024 based on the achievement of agreed commercial milestones.
Marrone Bio announced separately last week that it has established a $36.6 million financing facility through a right to call the exercise of certain existing warrants. Any resulting cash raised is anticipated to be sufficient to fund the current operating plan to a breakeven level, as well as fund near-term strategic alternatives such as the Pro Farm acquisition.
Pro Farm Background
Pro Farm, based in Finland, expands Marrone Bio’s international presence with a portfolio of products with a new mode of action to stimulate plant growth and improve plant health, resulting in improved yields and crop quality.
The Pro Farm manufacturing process begins with lignin – the key structural material found in wood and bark. The lignin is extracted as a byproduct from the pulp and paper industry, which Pro Farm converts into a purified derivative called lignosulfonate. The lignosulfonate is then combined in proprietary and patent-protected formulations that are highly concentrated and bio-available. The resulting plant stimulants encourage earlier plant establishment, more robust plant emergence, and overall improved plant health.
Pro Farm’s proven technology is used in seed and foliar treatments in the major row and specialty crops of corn, cereals, sunflowers, oilseed rape (canola), sugar beets and vegetables, with other crops in development. It has distribution agreements servicing most of the major global agricultural production areas, with particular strength in Europe and the Commonwealth of Independent States (CIS), and expansion under way in Latin America, North America, Africa and Asia.
Marrone Bio intends to retain Pro Farm’s key employees, and Pro Farm’s partial ownership of its manufacturing facility will transfer with the acquisition.
The 2018 global seed treatment market is valued at $4.6-$4.9 billion (Mordor Intelligence and Adroit Market Research), growing at an estimated CAGR of 9.8 percent to 11.3 percent. Europe is 33.2 percent of the global seed treatment, valued at approximately $1.6 billion.
Marrone Bio will attend BioEx 2019 to seek for more collaborations.
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