Wynca announced the signing of a strategic partnership between Huapont Life Sciences, Wynca and Nutrichem, on June 9, where Wynca may, in due course, seek to become a substantial shareholder of Nutrichem which is affiliated with Huapont Life Sciences.
The execution of the partnership marks deepened cooperation between the strongest in the Chinese pesticide industry, which aims at a win-win result.
The three-party strategic partnership covers the following activities:
Huapont and Wynca will use Nutrichem as a cooperative platform to work jointly in the business fields including but not limited to research and development of new agrochemical products, GLP technical service, joint technical service, transgenic and gene editing research, seed research and industrial chain deployment.
Wynca and Nutrichem will utilize their respective superior resources to strengthen the cooperation in the development of agrochemical product line, which may be implemented by setting up a joint venture, deepening the product supply chain collaboration and sharing of sales channels towards complementary and win-win results.
Wynca may seek an opportunity to become a substantial shareholder of Nutrichem via equity acquisition or equity participation in a manner of capital increase.
Each party, when and as product and service capacity allows, will give priority to the other party in the selection of products and solutions as well as in the case of product development and validation.
Based on the cooperation, the parties will provide customer resources to each other and assist in the introduction and recommendation of superior products.
The first strategic partnership has a term of three years. The contents of the partnership show that in addition to resource collaboration, the partnership mainly focuses on the restructuring of the equity of Nutrichem, which indicates that the Party A Huapont is intended to exit while the Party B Wynca seeks to take over the equity in due course.
Wynca focuses on glyphosate, while Nutrichem focuses on oxyfluorfen and mesotrione which are a niche market of herbicide. Nutrichem has a relatively rich pesticide product mix, which is complementary to Wynca to a certain extent. In view of downstream customer’s demand for integrated solutions, product diversification can help to enhance competitiveness. Moreover, both sides have room for cooperation in product development and channel development.
In the past few years, Huapont, the parent company of Nutrichem, has been making acquisitions to expand its businesses, having switched from the high-profit medical industry to the low-profit agrochemical and new material industries. Since the beginning of this year, Huapont’s stock price has risen sharply due to its involvement in cosmetic medicine, which seems to have made the company more determined to develop the medical industry. The company’s annual business report shows that “it will complete the spin-off and listing of its subsidiary Kaisheng New Material and will adjust the equity structure of Nutrichem,” indicating that divestment of the low-profit business has become imperative.
According to the 2020 annual report of Huapont, Nutrichem’s annual income was Yuan6.225 billion, with a net profit of Yuan314 million, ranking 5th among China’s top 100 pesticide sales companies in 2021. In the same year, Wynca ranked 6th with agrochemical sales reaching Yuan6.081 billion, accounting for nearly 50% of its total revenue. Its other major business is organosilicon.