Global Swiss agribusiness Syngenta announced it has agreed to acquire Nidera Seeds – the South American seed business owned by China’s state-owned COFCO International – for an undisclosed amount.
Plans by the Chinese grains trader to sell the Latin American seed business were first made public in August. Over the past three years COFCO has spent more than $3 billion acquiring the Dutch grain trader, Nidera, and international grain sourcer and trader Noble Agri – moves that were undertaken to strengthen COFCO’s standing in the global grains market, and to transform the Chinese player into a rival to the multinational ABCD companies of Archer Daniels Midland (ADM), Bunge, Cargill, and Louis Dreyfus.
In March 2014 COFCO announced the acquisition of 51 percent of Nidera, in a deal that valued Nidera at $4 billion. The transaction marked China’s first overseas purchase of a trading firm and gave the country direct access to South American grain and oilseed supplies. At the point of sale, Nidera had grain purchasing capabilities in Brazil, Argentina, and Central Europe, and a global trading network through which Nidera’s volumes exceed 33 million tons of grains, oilseeds, vegetable oils, oilseed meals, agricultural inputs, bio energy products, and forward freight engagements with annual sales of $17 billion. Two years later, in August 2016, COFCO International announced it had acquired the remaining 49 percent it did not already own in the Dutch grain trading firm.
However, the acquisitions saddled COFCO International, which was created in April of this year as an umbrella under which to combine the offshore grain trading business, with losses brought on by Nidera.
As a result COFCO International has undertaken to restructure its South American and European operations, and has decided to divest its complete stake in the seed space, according to CNBC.
“This agreement is an important step of our strategy to focus on our major businesses,” said Johnny Chi, chief executive officer of COFCO International, in a brief statement. “Syngenta is well placed to provide Nidera Seeds a strong platform for further long-term growth, creating best value for its customers, farmers and employees.”
Remains with China
Syngenta being well positioned to foster future growth for Nidera Seeds may well be in reference to the fact that the sale of Nidera Seeds to Syngenta will ensure that the seed business will remain in Chinese hands, as Syngenta is on pace to be acquired by ChemChina for $43 billion.
In February 2016 ChemChina made a bid of $465 per share for the Swiss agri-giant – a deal that when completed would represent the largest foreign purchase ever made by a Chinese company.
Born from the merging of Novartis and AstraZeneca in November 2000, Switzerland-based Syngenta is one of the largest producers of agri-chemicals and seeds in the world, with a presence in more than 90 countries and 2015 sales totaling $13.4 billion, of which 27 percent was generated in North America, according to the New York Times.
It was expected that such a deal would face in-depth scrutiny by global antitrust regulatory bodies, however it has been making consistent headway – gaining approval from the Committee on Foreign Investment in the United States (CFIUS) in August 2016, and gained approval from the U.S. Federal Trade Commission (FTC) in April of this year on the conditional divestment of ChemChina’s generic production of the herbicide paraquat, the insecticide abamectin, and the fungicide chlorothalonil.
Shakeup
Multiple years of worldwide bumper crops and commodity markets under pressure has resulted in massive consolidation and reorganization among the top grain and seed players in recent years.
COFCO’s divestment of its Latin American seed business is the latest in a string of deals that include some of the largest on record including the $130 billion 50/50 mega merger of Dow Chemical and DuPont announced at the close of 2015.
Within the first two years after merging, DowDuPont plans to split into three publicly traded, independent businesses through a process of tax-free spin offs.
The agricultural unit will bring together both DuPont’s and Dow’s seed units and crop protection units with expected revenue of $19 billion. The material science units will encompass DuPont’s Performance Materials unit and Dow’s Performance Plastics, Performance Materials and Chemicals, Infrastructure Solutions and Consumer Solutions units with expected revenues of $51 billion. And the Specialty Products business will include DuPont’s Nutrition and Health, Industrial Biosciences, Safety and Protection and Electronics & Communications units, along with Dow’s Electronic Materials unit, with expected revenue of $13 billion according to NPR.
In September 2016 Bayer announced it had agreed to acquire Monsanto after months of negotiating and three bid increases, finally setting bid of $66 billion for takeover of the company.
If successful, a deal between Bayer and Monsanto would have a significant effect on Bayer’s structure, making about half of the group’s sales originate from agriculture instead of health care – but despite the transitional challenge that this might pose, key players see the deal as bringing together two different but complementary businesses that will create a wide platform of solutions and benefits for the world’s farmers.
More recently, in July of this year China’s CITIC Agri Fund agreed to acquire a portion of Dow AgroScience’s corn seed business in Brazil for a $1.1 billion.
The deal includes seed processing plants, seed research centers, a copy of Dow AgroSciences’ Brazilian corn germplasm bank, the Morgan seed brand, and a license to use the Dow Sementes brand for a predetermined period of time.
The sale of the assets, which generated $287 million last year, is being undertaken by Dow in order to satisfy conditions set by U.S. anti-trust regulators and Brazil’s Administrative Council for Economic Defense (CADE) in relation to the aforementioned company’s pending $130 billion merger with DuPont.
And in October of this year, Bayer had agreed to divest significant portions of its seed and non-selective herbicide business to BASF in a US$7 billion all-cash deal.
This deal not only positions Bayer to acquire regulatory approval for the acquisition of Monsanto, but marks the entrance of Germany’s BASF, the third largest player in the crop chemical industry, into the global seeds space – a sector that the group had previously avoided in favor of the development of beneficial plant traits that it would then license to outside seed developers.
-Lynda Kiernan
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