Sinochem to acquire Monsanto Asia brands

Date:02-08-2008

Monsanto has agreed to sell off its butachlor and alachlor herbicide businesses in India, the Philippines, Thailand, Vietnam, Taiwan, Pakistan and Bangladesh, to the Singapore-registered subsidiary of the Chinese agricultural supplies company, Sinochem International (Shanghai). As part of the deal, Monsanto India's (MI) butachlor and alachlor assets are being transferred at a total consideration of around Rs 330 million ($8.4 million). The total value of the Asia deal remains undisclosed.

Sinochem's agrochemical division distributes Monsanto, FMC and Syngenta products in the Chinese market. It acquired exclusive selling rights for Monsanto's Machete, Machete Plus (both butachlor), Harness (acetochlor + atrazine), and Lasso (alachlor) products in China in 2003. It has been able to increase the sales of these products by 20% since then, according to the president of Sinochem's agrochemical business, Li Dajun. Sinochem also sells Roundup (glyphosate) in China.

The sale of MI's assets will involve the transfer of three key brands: Machete, Fastmix, and Lasso. Machete and Fastmix contain the pre-emergence rice herbicide, butachlor, which constitutes around 11% of the Indian herbicide market. Lasso contains the pre-emergence herbicide, alachlor. The deal, approved by MI's board of directors, is subject to shareholder approval, which will be sought by postal ballot.

The divestment is a strategic move by MI to focus on its two core businesses: hybrid maize seed and Roundup herbicide. -As a company that is focused on discovering and delivering higher-yielding seed and trait technologies to farmers throughout the world, we believe that the butachlor and alachlor businesses would be better served in the hands of a party that is primarily focused on delivering innovations in chemistry," explains Monsanto's Asia-Pacific region head, Andre Dias.

In a similar move, the Indian subsidiary had divested its sunflower seed business to Belgian biotechnology company Devgen (Ghent) for $3.9 million in September 2007. This move was part of a bigger deal in which Devgen acquired some of Monsanto's seed assets in India, Pakistan and the Philippines for $26 million . Prior to that deal, MI had sold its wheat herbicide, Leader (sulfosulfuron), to Sumitomo Chemical for $3.9 million

All these divestments indicate a strategic shift from the saturated, low-profit, generic herbicide market and a focus on the high-profit seed market. In MI's results for the quarter ended December 31st 2007, net sales dropped by 5.4% to Rs 644.9 million but profit after tax went up by 25.9% to Rs 180 million. In the year ended March 31st 2007, MI's agrochemical sales went down by 18.1% to Rs 1,360 million while its seed sales went up by 4.7% to Rs 1,928 million over the previous year.