Seed Market Heats Up Amid Further Consolidation

06 December 2004 00:01  [Source: ICB Americas]

The landscape of the US seed industry continues to shift as major agbiotech companies expand their market shares. Competition within the modified seed traits business is heating up, as seen from the spate of acquisitions this year by Monsanto, Syngenta and DuPont.

Monsanto Company’s recent formation of American Seeds Inc. (ASI) was viewed by analysts as a potential vehicle for further acquisitions of small US seed businesses. ASI immediately acquired Channel Bio Corp. for $120 million, expanding Monsanto’s US corn seed market share by 2 percent to 16 percent. Channel also has a smaller share of the US soybean market.

“The US seed industry is highly fragmented with 250 small, regional seed companies competing against heavyweights Monsanto, DuPont’s Pioneer Hi-Bred and Syngenta. The formation of ASI could signal [the] advent of a roll-up strategy in seeds for Monsanto,” says Banc of America Securities analyst Kevin McCarthy.

Monsanto also expanded its North American seed portfolio this year with the acquisition of First Line Seeds, Canada’s major soybean seed supplier, in January, and Advanta BV’s North American canola seed assets in September.

Monsanto’s major competitor, Syn-genta, has also made major seed deals. In September, Syngenta acquired 90 percent of Advanta BV’s North Ame-rican corn and soybean business for €239 million ($319 million). In August, Syngenta acquired a 90 percent stake in the Golden Harvest group of companies for $180 million. The acquisitions collectively expanded Syngenta’s US corn market share to 15 percent and soybean share to 13 percent.

As one element of its growth strategy, Syngenta says it will always be open to acquisitions of small and mid-size companies, although it expects the peak period of industry consolidation to be essentially over.

“There’s been a process of consolidation in the global agribusiness in recent years, the outcome of which is a few major integrator companies,” says an official from Syngenta Americas. “The seed business is a stable market with much potential to be realized. With many factors driving market growth, Syngenta is well positioned for this marketplace through its investment strategies, leveraged technologies and research efforts.”

Syngenta also expanded its seed trait portfolio early this year with the acquisition of corn breeding materials, including germplasm and inbreds from CHS Research LLC. Syngenta acquired a glyphosate tolerance technology for corn from Bayer CropScience last May.

For now, the company says it is focused on integrating its recent acquisitions and further developing its research and development initiatives. Syngenta recently announced that it will close or reduce capacity at 12 corn seed and soybean seed production locations and two field offices to better align production with demand. Completion of the integration process and site closings is expected to be complete by June 30, 2005.

As for DuPont, the company acquired Verdia Inc., a wholly owned subsidiary of Maxygen Inc., in June. DuPont says the $64 million investment will significantly enhance the company’s gene research and trait discovery capabilities. DuPont will have the exclusive rights to use Maxygen’s gene shuffling technology for agricultural applications.

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