Sumitomo/ Hodogaya pesticide joint venture to split into two

Sumitomo Chemical and Hodogaya Chemical revealed that they had agreed to separate their joint venture Nihon Green and Garden, or Nihon G&G, which makes and sells pesticides and related products for non-farming uses, into two companies using a stock-split arrangement. The transaction will be carried out on April 1.

Sumitomo owns 74% and Hodogaya 26% of the joint venture, which is capitalized at 95mn yen ($1.14mn) and has an integrated business setup, from R&D to marketing. Its sales reached 4.1 bn yen in fiscal 2009, but in the present severe environment of keen price competition in the horticulture segment and recession-hit prices in the golf-course segment, the partners agreed that more efficient and agile R&D and marketing were necessary for business development.

A new joint venture tentatively named Hodogaya Agrotech, with 60mn yen in capital, will take over Nihon G&G’s business in the horticulture, forestry and railroad segments. Hodogaya Chemical, for whom these segments are core markets, will hold an 80% controlling stake, with Sumitomo having 20%, in this company, which will be headquartered in Tokyo, with a laboratory in Tsukuba, Ibaraki Prefecture, and start with 17 employees, targeting annual sales of about 2.5 bn yen initially.

Sumitomo will wholly own the second company, which will be named Nihon G&G as well and continue its predecessor’s business in the golf-course segment. It will begin with 27 employees, a business office in Osaka, and two labs each in Takarazuka, Hyogo Prefecture, and Hamamatsu, Shizuoka Prefecture. Close ties with Sumitomo group companies are expected to provide it with strong competitive power.