FMC Corp. (FMC) and DuPont announced March 31 the signing of a definitive agreement for FMC to acquire the portion of DuPont's Crop Protection business it must divest to comply with the European Commission ruling related to its merger with The Dow Chemical Co.
As part of the deal, DuPont will acquire FMC Health & Nutrition and receive $1.2 billion in cash, while FMC will acquire DuPont's global chewing pest insecticide portfolio, its global cereal broadleaf herbicides and a substantial portion of DuPont's global crop protection research and development (R&D) capabilities. FMC expects that this acquired business will generate approximately $1.5 billion in revenue and $475 million of earnings before interest, tax, depreciation and amortization in 2017.
After closing the acquisition, FMC Agricultural Solutions will become the fifth-largest crop protection chemical company in the world by revenue, with estimated annual revenue of approximately $3.8 billion.
"This is a significant step forward for FMC and for our Agricultural Solutions business in particular," FMC president, chief executive officer and chairman Pierre Brondeau said. "The combination of market-leading products from DuPont's crop protection portfolio and its world-class R&D capabilities will transform our Agricultural Solutions business into a tier-one ag technology company.”
Brondeau continued, “The crop protection industry is undergoing significant change, as evidenced by the consolidation currently underway. To continue to meet the demands of our customers, FMC needs to provide more options to growers looking for innovative solutions that protect crops and increase yields. By combining these high-value products and R&D capabilities with our own product portfolio, pipeline and formulation expertise, FMC will be able to serve our customers better and accelerate the pace at which we bring new solutions to the market.”
The concurrent sale of FMC's Health & Nutrition business will allow the company to maintain a strong balance sheet and ensure that it can continue to invest in growing both its Agricultural Solutions and Lithium segments, he added.
Business being acquired
The acquired portion of DuPont's crop protection business includes an industry-leading selective insecticide portfolio consisting of Rynaxypyr, Cyazypyr and Indoxacarb. The first two of these products have full patent protection over their respective active ingredients, and FMC expects the products to generate more than $1 billion in 2017 revenue.
“These selective insecticides are highly complementary to FMC's existing broad spectrum insecticide portfolio,” the company stated.
The acquired portfolio also includes DuPont's global cereal broadleaf herbicides, consisting of nine active ingredients and multiple formulated products. This herbicide portfolio comes with strong, recognized brands and DuPont's proprietary PrecisionPac technology. FMC said these products bring significant diversification to its crop exposure in herbicides, as well as increase the balance of pre-emergent and post-emergent applications in FMC's portfolio.
The geographic spread of the revenue in this portfolio will result in a significant increase in FMC's presence in Asia and Europe. Following the acquisition, FMC's crop protection revenue will be almost equally spread across all four major regions: North America, Latin America, Europe and Asia.
The underlying intellectual property related to the acquired products, including patents, registrations and data packages, will be transferred to FMC, and the company will also acquire a global manufacturing network to fully support these products, including four active ingredient manufacturing facilities and 10 regional formulation plants.
The acquisition will bring DuPont's world-class discovery and development organization, including its Delaware crop protection research headquarters, 14 regional development labs and related regulatory capabilities. This organization includes a pipeline of 15 synthetic active ingredients currently in development covering insecticides, herbicides and fungicides and an extensive library of 1.8 million synthetic compounds. The majority of DuPont's crop protection research workforce will transfer to FMC as part of this transaction.
FMC Health & Nutrition will become part of DuPont's Nutrition & Health segment.
"FMC Health & Nutrition is a highly profitable business with leading positions across the vast majority of its portfolio, deep applications knowledge and an extensive global network of laboratories and manufacturing facilities. It is a very complementary fit with DuPont's current portfolio. We are confident it will thrive under DuPont's leadership and will contribute to their successful Nutrition & Health business," Brondeau said.
The transaction is subject to the closing of the Dow and DuPont merger, as well as customary closing conditions and regulatory approvals. Closing is expected to occur in the fourth quarter of 2017. FMC expects this transaction to be immediately accretive to adjusted earnings per share and said it will give updated guidance for 2017 at its earnings call scheduled for May 2, 2017.