A review of impacts and happenings since 2017
In late 2017, the agribusiness sector was uncertain as to the likely impact(s) that the three agribusiness mega mergers undergoing review at that time (ChemChina-Syngenta, Bayer-Monsanto and Dow-DuPont) would have.
At that time, it was predicted that the mergers may have positive and/or adverse effects. A state of limited competition may be created, the fusion of resources from merging companies may lead to effective and targeted research outcomes and at the same time, the benefit inherent in divergent research outcomes from the several research and development departments may be lost as a result of the mergers.
In spite of the fear and uncertainty expressed by the public regarding these mergers, industry regulators responsible for merger review gave their approvals and parties brought the respective transactions to a close.
It appears that since these mergers closed, their positive outcomes have dominated the agribusiness sector. Diversification into complementary lines of business has ensued and research and development has greatly improved as a result of the mergers. Positive impacts specific to each of these mergers are set out in the paragraphs that follow.
Prior to the merger, Dow Chemical was predominantly involved in crop protection (production and sales of herbicides and insecticides), while DuPont was largely involved in seeds and biotechnology.
As a result of the merger, both companies have been able to fuse their complementary specialties into a balanced production stream.
After the merger in 2019, Dow-DuPont was spun off into three entities – Dow (production of performance chemicals), DuPont de Nemours (with focus in specialty materials) and Corteva (responsible for agricultural chemicals and seeds production).
Research and development has also improved tremendously as a result of this merger. For instance, Corteva through its platform, ‘Open Innovation’, has fostered research and development in gene editing, disease resistance, herbicide resistance, native insect control and genotyping amongst others. Corteva’s research resulted in the development of a new breeding technique (CRISP-Cas) for plants such as soybeans, sorghum, canola and corn. It does appear that by allowing scientists from each of their previous research and development departments to work together, more innovative products have been generated.
ChemChina’s merger with Syngenta is also believed to have enabled ChemChina whose core business was sale of pesticides, to take benefit of Syngenta’s seed, biotechnology and GMO operations.
One of the significant outcomes of this merger is the establishment of a new technology venture with Yuan Longping High-tech Agriculture Co. Ltd. The tech venture is to develop and sell a new variety of genetically modified corn in China. The merger has also created a demand for seed care and treatment services in China. Seeds with special genetic traits i.e., resistance to pests and droughts have also been introduced.
Like the other two mergers, the Bayer-Monsanto merger has also synergized the previous efforts of the two companies in seed development. The merger resulted in a balanced diversification in healthcare and in crop science and seeds.
Post the merger, one of the resulting research and development companies was JonyBio. The research focus was to explore the impacts of applying microbes to plants.
In addition to the foregoing deals, several other mergers and acquisitions have featured in the agribusiness space since our 2017 publication. These deals include:
- Acquisition of Botanical Resources Australia by Sumitomo Chemical;
- Acquisition of Macdon by Linamar;
- Merger between Potash Corporation and Agrium;
- Acquisition of SST Software by Proagrica; and
- Acquisition of Camso by Michelin.
A brief description of these deals are set out below.
Sumitomo Chemical’s acquisition of Botanical Resources Australia
In March 2018, Sumitomo Chemical, a Japanese company completed the acquisition of Botanical Resources Australia predominantly known for natural insecticide production. It is expected that the merger will lead to a transfer of knowledge from Botanical Resources Australia to Sumitomo Chemical on the extraction of pyrethrins and consequently lead to a steady supply of insecticides.
Linamar’s acquisition of Macdon
In January 2018, Linamar announced the closing of a 100% acquisition of equity interest in Macdon, a Canada based company predominantly known for the design and manufacture of specialised harvesting equipment. It is anticipated that this acquisition will position Linamar as a leading manufacturer of agricultural equipment, fuse Macdon’s expertise with Linamar’s and foster Linamar’s diversification.
Merger between Potash Corporation and Agrium
The merger between Potash Corporation and Agrium was completed in 2018. A significant outcome of the merger since its conclusion is the creation of Nutrien as a provider of crop inputs and services. Nutrien produces and distributes potash, nitrogen and phosphate products and has since its establishment greatly improved food production.
Proagrica’s acquisition of SST Software
In 2018 as well, a data company, Proagrica acquired a 100% equity stake in SST Software, a US based farm data and software provider whose products include FarmRite and Sirrus. According to Proagrica’s MD, Graeme McCracken, the acquisition will lead to a combination of expertise of the two companies in data analysis and connectivity and creation of unique and innovative solutions for their customers.
Michelin’s acquisition of Camso
In December 2018, Michelin finalized its $1.36 billion acquisition of Camso, a manufacturer of rubber tracks for farm, equipment. The projected benefits of the merger includes creation of a strong OTR market player, fusion of expertise and increased sales.
The impacts of the mega mergers (ChemChina-Syngenta, Bayer-Monsanto and Dow-DuPont) that lead the big six into the big four continue to unfold. However, the positive impacts in diversification and increased innovation have dominated the agribusiness sphere since their respective closings.
As the years go by, it is likely that many mergers and similar restructurings will take place in the agribusiness space.
Please contact Andrew Chalet, Principal, on (03) 8602 7243 or Felicity Iredale, Associate, on (03) 8602 7254 if you would like any further information.
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