Agribusinesses acquire biopesticide makers

Several U.S. biopesticide manufacturers have recently been snatched up by global agribusiness companies, which experts say will likely spur more research and investment in the industry.

BASF, a German-based chemical company, plans to spend more than $1 billion on Becker Underwood, a producer of biological seed treatments and other products in Ames, Iowa.

Syngenta, a Swiss global biotech and chemical company, will pay up to $114 million for Pasteuria Bioscience of Alachua, Fla., which uses naturally occurring soil bacteria for nematode control products.

The acquisitions, both announced in mid-September, came two months after another major global chemical company -- Bayer CropScience -- said it would buy California biopesticide producer AgraQuest in a deal valued at roughly $500 million.

Industry experts say biopesticides, which rely on naturally occurring substances and microorganisms, have seen tremendous sales growth in recent years.

"It speaks to the strength of the interest in the biopesticide category," said Bill Stoneman, executive director of the Biopesticide Industry Alliance.

The recent acquisitions may spur more competition for biopesticides developed by universities, making it harder for startup companies to afford licenses for those technologies, he said.

The upside is that previously ignored biopesticides invented by university researchers may now be considered commercially viable, Stoneman said.

The big money involved in recent mergers will also inspire startups to conduct their own research and development, and may provide investors with more confidence to fund such companies, he said.

"Venture capital companies will take a second look. It puts the industry on the radar screen of venture capital and investment companies," said Mark Trimmer of the market research firm Dunham Trimmer.

The quick succession of recent purchases comes after years of review by major global chemical companies, said Trimmer. "It's all coming to fruition now."

Consolidation is being driven by several factors, including the structure of the biopesticide industry, he said.

Global sales are pegged at about $1.3 billion to $1.6 billion a year, but the market is dominated by more than 100 small companies, many of which have only one product, Trimmer said.

By comparison, the conventional pesticide industry has annual sales of $47 billion, and six companies generate 75 percent of those revenues, he said. It's more efficient for fewer companies to deal with multiple products.

"When you're a distributor, you want to make better use of your time," Trimmer said.

Bringing biopesticides to market is also less onerous than for conventional pesticides due to the federal regulatory approval process for the chemicals, he said.

The U.S. Environmental Protection Agency reviews biopesticides for safety, but the process is less expensive and is completed years sooner, Trimmer said. "They're derived from natural sources. They're inherently less toxic."

Large chemical companies generally prefer to buy existing biopesticide producers even though they have the resources to conduct their own research and development, he said. Developing a new product from scratch can be just as expensive but may not achieve the desired result.

"They know what they're getting today," said Trimmer. "It's a little bit more certain, but there's risk with any investment."

Pesticide resistance to conventional pesticides has boosted interest in biopesticides, which are generally used in conjunction with such chemicals in integrated pest management, or IPM, he said.

Grocery retailers who want to appeal to the environmental concerns of consumers are also exerting pressure on their fruit and vegetable suppliers to use IPM, said Stoneman.

"They're asking their growers to document they're using sustainable practices," he said.