ADISON, N.J., and LUDWIGSHAFEN, Germany – Another major deal in the highly competitive and rapidly consolidating agrochemical industry was announced as German chemical giant BASF AG purchased American Cyanamid, the agricultural division of drug company American Home Products (AHP), Madison, N.J. American Cyanamid also produces common turf pesticides, such as Pendulum, Image and Amdro, and is involved in the RohMid partnership to produce MACH 2.
BASF – Europe’s largest chemical manufacturer – will pay AHP $3.8 billion in cash and will assume some debt. The sale caps a six-week auction of the business, according to The Wall Street Journal, that included Bayer, Dow Chemical and DuPont. AHP originally wanted $3 billion for American Cyanamid, according to the report. In the end, BASF outbid the competing companies and has now joined agrochemical world leaders Astra-Zeneca, Novartis and Aventis in the continuing industry consolidation trend.
With the American Cyanamid acquisition, BASF claims it is now the fourth-largest agrochemicals group behind Syngenta, Aventis Crop Science and Monsanto. Syngenta is the agribusiness created by the December 1999 merger of Novartis’ Crop Protection and Seeds business and AstraZeneca’s Zeneca Agrochemicals business.
The deal could also mark BASF’s return to activity in the turf industry. The company slowly shifted its focus from the turf industry over the last decade, but recent product development efforts will reportedly lead to the introduction of new fungicides and herbicides.
Insiders report that American Cyanamid’s sale was driven by sagging performance in the company’s agricultural products group as a whole, despite strong performance by the specialty turf business. AHP has been looking to sell this portion of its business for some time.
According to a news release, AHP officially put the division up for sale after its failed merger attempt with Warner-Lambert Co., which is being acquired by Pfizer. But pesticide industry experts say American Cyanamid was available for some time.
“The sale of Cyanamid reflects AHP’s strategy to focus on pharmaceutical, biopharmaceutical, consumer health care and animal health products businesses,” said John Stafford, the chairman, president and CEO of AHP. But, according to Gary Curl, business director for turf, ornamental and pest control products for American Cyanamid, “this acquisition is not a decision that has been pushed forward by Cyanamid management.”
BASF’s acquisition of Cyanamid is scheduled to be completed by July 1, pending approval from anti-trust authorities. Transition teams should be named shortly, Curl said, and future employment and company decisions will move ahead once they are formed.
Company officials said the purchase would double BASF’s annual sales in crop protection, which totaled $1.9 billion in 1999. BASF’s and Cyanamid’s crop protection businesses combined in 1999 for pro forma sales of $3.6 billion and income of $450 million.
“Approximately $250 million in annual synergy effects are expected to be generated by the transaction, with approximately half of the benefits to be achieved in the first full year after the acquisition,”’ according to a BASF release.
“From a production point of view the two businesses fit well together. BASF is strong in herbicides and fungicides, AHP in insecticides,” Merck Finck analyst Michael Butscher stated in a Reuters news release.
Some analysts questioned the high price BASF paid for American Cyanamid and worried about the assumption of debt, but other analysts said the deal is positive because it bolsters BASF’s position as one of the world’s top agrochemical producers.
“BASF is buying American Cyanamid at a time when the agricultural economy is down in a trough,” Curl said. “But we’re expecting that in the next few years as the farm economy rebounds, this will look like a very smart deal.” – L&L Staff
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