Adam Putz April 05, 2017
American Vanguard (NYSE: AVD) subsidiary AMVAC Chemical has agreed to acquire three crop protection products from ChemChina subsidiary Adama Agricultural Solutions. The deal is part of a consent agreement reached between the US Federal Trade Commission and ChemChina, as its $43 billion takeover of Swiss chemical company Syngenta (SIX: SYNN), a global leader in pesticides, wends its way through regulatory reviews worldwide. Adama has also been a sticking point for officials elsewhere as other antitrust reviews contend with Bayer (ETR: BAYN) and Monsanto (NYSE: MON) coming together, as well as DuPont (NYSE: DD) and Dow Chemical (NYSE: DOW).
The trio of deals represents over $225 billion in combined corporate consolidation and a possible threat to competitive pricing of crop protection products for farmers. It’s also a rare opportunity for buyers like American Vanguard to acquire assets that likely wouldn’t have been on the market otherwise.
These deals aren't catching the industry's eye just on size alone, but rather also because the agricultural chemicals space hasn't been the most active area for M&A historically. In the past five years, corporate M&A activity in the industry has accounted for just 127 deals involving 104 investors, according to the PitchBook Platform:
The massive deal between ChemChina and Syngenta cleared European Commission review as predicted Wednesday, on condition that ChemChina divest “significant parts” of its European pesticide and plant growth-regulator business. The ruling ends an in-depth investigation begun in late October.
Unlike Syngenta, which produces pesticides based on its own active ingredients, Adama only produces generic pesticides based on chemical components developed by third parties for which the patent has expired. And it’s the world's biggest producer of such generic pesticides—a mark in its favor for the Commission because that means it does not carry out R&D activities to discover new ingredients. Without the agreed-upon remedies, the deal would have removed European competition between Syngenta and Adama.
American Vanguard’s shares jumped 6% on Wednesday.