Adama in JV with China’s Huifeng Prior to Takeover
Following the signing of a Memorandum of Understanding in January, Adama and China’s Jiangsu Huifeng Bio Agriculture have now entered into a joint venture in advance of a larger transaction in which the Israeli agrochemicals group envisages acquiring Huifeng’s overall business.
In this first step, Adama will pay $53 million in cash to take a 50% share in Huifeng’s wholly owned subsidiary Shanghai Dibai Plant Protection, which sells and distributes formulated crop protection products in China.
The deal is subject to the completion of an appraisal report and also contingent on Huifeng resuming the majority of its formulation activities and entering into definitive agreements for the overall transaction.
The jv is expected to be finalized before the end of Q1 2020. As equal shareholders, Adama and Huifeng will jointly manage the company and have equal representation on the board of directors. Adama, however, will be responsible for setting the JV’s commercial, marketing and branding direction.
With sales of around $75 million, Shanghai Dibai has a portfolio of more than 150 product registrations. Under the terms of the transaction, the Chinese company will obtain the exclusive, indefinite, royalty-free rights to license Huifeng’s existing and future registrations in China, while also conducting all sales of formulated products in the country.
“This strategic commercial joint venture is a significant milestone in our ongoing, rapid expansion in China and will significantly bolster our commercial activities, posting and offering in this key crop protection market,” said An Liru, Adama’s senior vice president China.
Huifeng’s chairman Zong Hangen added that the collaboration with Adama will also lead to the “significant expansion of the global market for Huifeng’s innovative products and solutions.”
In separate news, Adama announced it is to acquire French-Swiss crop protection company SFP – its second acquisition in Europe so far this year.
Based in Aix-en-Provence in France and in Sion, Switzerland, the company has “strong, focused” positions in key products in Europe, notably in the plant growth regulator and fungicide segments.
The European market for plant growth regulators, which are widely used in agriculture and gardening, is worth $375 million, according to Adama.
The Tel Aviv-headquartered group said SFP’s products are highly complementary to its European portfolio and are “poised to drive significant growth” for Adama going forward.
In addition, Adama already manufactures certain active ingredients in SFP’s products and noted the backward integration would provide benefits such as competitive costs, quality assurance and traceability.
“SFP has built an attractive portfolio of straight and differentiated mixture products that have carved out compelling positions in France and other key European countries. We are now looking forward to taking the business to the next level, leveraging our commercial presence across Europe,” said Bertrand Lombard, Adama vice president Southern Europe.
The transaction is expected to close within the coming weeks.
Just days ago, Adama also announced the purchase of Peruvian crop protection company AgroKlinge. This deal is also anticipated to close within the next few weeks.