Sumitomo Takes Nufarm’s South American Seeds
The deal will triple Sumitomo’s crop protection revenues in South America, surpassing that generated in North America.
Sumitomo said the South American crop protection market accounts for roughly 25% of the world market, larger than North America or China. It added that Brazil is the world’s largest crop protection market with huge demand, especially for soybean treatments, while Argentina is also one of the world’s leading agricultural countries.
As part of the deal, Nufarm has extended its existing commercial agreements with Sumitomo as well as entering into new arrangements. The Australian group is confirmed as the preferred commercialization partner for Sumitomo’s proprietary fungicides Pavecto and Indiflin in Germany, Poland and the UK. In addition, the existing master agreements between the firms for product development and commercialization have been extended to 2025, with a mechanism to further extend the term.
The two companies will also enter into a two-year supply deal and transitional services agreement under which Nufarm will provide procurement services and certain products to the South American businesses.
“This transaction represents compelling value for Nufarm shareholders and will provide an opportunity to refocus on other parts of the business where we can generate higher margins and stronger cash flow,” said Nufarm’s managing director and CEO Greg Hunt. “Our commercial relationship with Sumitomo provides access to an attractive portfolio of proprietary products and will continue to be an important contributor to our growth. Today’s agreement extends the term of our existing relationship and provides new opportunities to build on our expanding product portfolio in Europe.”
Sumitomo said one of its products that will benefit directly from the acquisition is Indiflin, a novel fungicide active ingredient that is set to launch in 2020 or later. Indiflin has a high efficacy against major plant diseases such as Asian Soybean Rust, which is caused by two types of fungi.
The deal also adds a formulation plant to Sumitomo’s assets, which the company said it can operate closely with its existing R&D facility and adjoining experimental field, allowing it to integrate its operations from development through formulation to distribution.
Nufarm’s board has unanimously recommended the transaction, which must still be approved by shareholders at its meeting in December. The deal, which also remains subject to regulatory clearance, is anticipated to close in the first half of 2020.
The Melbourne-based group said it will use proceeds from the sale to pay down debt.