AstraZeneca and Novartis Announce Agrochemical Merger
LONDON – The consolidation of the specialty pesticide industry continued today as the boards of AstraZeneca PLC and Novartis AG announced that they have each unanimously agreed to spin off their agricultural chemical businesses and merge them into the world’s first dedicated agribusiness company, according to releases by both companies.
The companies announced that Novartis Crop Protection and Seeds businesses and Zeneca Agrochemicals will be merged to create Syngenta AG. The merger brings together companies that had combined sales in 1998 of $7.9 billion, which will be the world’s largest agrichemical company with combined 1998 sales of $2.9 billion in NAFTA, $2.9 billion in Europe, $1.1 billion in Latin America, $0.8 billion in Asia/Pacific and $0.3 billion for the rest of the world.
Ironically, Novartis was formed via the merger of Ciba and Sandoz in early 1996. Now, the company has decided to focus primarily on its growing health care business, hence the spin off of its crop protection and seeds businesses. Coincidentally, AstraZeneca was formed via last year’s merger between Astra and Zeneca Professional Products.
Rumors of this deal have been circulating since the third quarter of 1999. The fact that some sort of deal would take place involving Novartis seemed likely when Randy Williams, who was named vice president of the global turf and ornamental business for Novartis last June, commented at an October media event held by Novartis that he didn’t know if the company would still be Novartis "12 months from now."
According to statements made by the companies, the development of Syngenta will be based on the combination of the largest global sales and service networks with the broadest and most attractive product portfolio in crop protection and a leading position in seeds. Syngenta will build on the most profitable crop segments to create and capture increased value in the agribusiness food chain through accelerated innovation to meet the needs of growers, processors and consumers.
Meanwhile, Novartis’ presence in the turf care industry is represented by products such as its herbicide Barricade, its insecticides Avid and Award, its fungicides Alamo, Banner Maxx, Subdue, Compass and Medallion, and its plant growth regulator Primo Maxx. AstraZeneca’s turf presence is represented primarily by its line of chlorothalanil fungicides.
"The launch of Syngenta creates the first global dedicated agribusiness company, a leader in its industry that will be well positioned for profitable growth. We have an outstanding outlook based on our rich and promising pipeline and our strong technology platform," said Novartis Chairman and CEO, Dr. Daniel Vasella, in a statement released by the company.
The merger is conditional on the shareholder approvals of Novartis and AstraZeneca and receipt of relevant regulatory clearances. Completion of the merger is expected to take place in the second half of 2000. Representatives of the turf and ornamental business for both companies said most plans for the future of the organization are still being determined.
Syngenta will have headquarters in Basel, Switzerland, and Michael Pragnell, presently CEO of Zeneca Agrochemicals, will be CEO of Syngenta. Pragnell said, "Zeneca Agrochemicals and Novartis’ Agribusiness are an ideal fit with complementary product portfolios and a strong international sales and marketing culture.
MERGERS & ACQUISITIONS
SOUTH PLAINFIELD, N.J. – The consolidation of landscape companies continued when one of the leading independent companies was acquired by a company striving to be a complete facility management group.
The Morrell Group, Atlanta, Ga., was acquired by Omni Facility Resources, thereby ending industry speculation about the future of Atlanta’s largest remaining independent landscape company. George Morrell, founder of the company, will remain with the organization along with the rest of his management team.
"The Morrell Group is a classic example of the companies we’re interested in," explained Betty Browne, president and CEO, Omni. "We’re looking for leaders in their market with a great management team, a great customer base and who are looking for an investment in their company in order to fund future growth. That’s what we’ve been doing, and that’s what we’ll continue to do."
Omni, which entered the landscape industry with its 1998 acquisition of Heyser Landscaping, Norristown, Pa., also announced the acquisition of Smith Fox Associates, which is one of the largest interior plant maintenance companies in the Philadelphia/Delaware markets. Smith Fox will operate as Smith Fox Heyser Associates after merging with Heyser Landscaping’s interior plant maintenance division.
Omni’s acquisitions are of particular interest because these acquisitions signify a different approach to the consolidation game than the strategy that has dominated landscape industry consolidation news to date. Omni’s goal is to be a "true one-stop shop" for its customers, according to Browne.
"One-stop shopping is growing based on customer demand, and this is a trend that is only growing in strength," Browne explained. "We saw the outsourcing of services move from an experiment in business management to something that is a given in the corporate environment, and now we’re seeing the next phase take place, which is vendor reduction."
Browne said Omni has revenues of about $150 million and operates in 27 states, with more than $30 million of that figure coming from the landscape industry. Other revenues come from services such as mechanical and HVAC maintenance, air filter replacement services and commercial janitorial services.
With future plans including a potential public-stock offering, Browne said she expects Omni to continue its aggressive growth plans.
"When we bought Heyser, it was operating in five states," explained Browne, pointing out that the company wants to offer all of its services to all of its customers. "Now Heyser has offices in 16 states."
Much of this growth has resulted from offering landscape services out of the offices of other Omni companies across the country.
Browne also noted that she expects to see the pace of consolidation in the landscape industry increase during the next 12 months.
"But I don’t think we’ll ever see the rate of consolidation in the landscape industry that we saw in 1998," she noted.
MERGERS & ACQUISITIONS
PORT WASHINGTON, WIS. – The rapid consolidation trend in the landscape industry continued with a twist when Simplicity Manufacturing, a consumer lawn mower manufacturer, acquired Ferris Industries, Munnsville, N.Y.
The deal includes the purchase of 100 percent of Ferris Industries by Simplicity Mfg., including access to their distribution, according to Warner Frazier, chairman and CEO, Simplicity Mfg., who pointed to the current rapid growth in the landscape contractor industry as a key reason for Simplicity making the deal.
"The market for commercial mowers is increasing at a faster rate than the market for consumer mowers, so this acquisition is an opportunity for us to increase growth quickly," Frazier explained. "We looked to get into this market about 10 years ago when we acquired a small commercial mower manufacturer that didn’t have a real presence in the commercial market, but we learned that you have to have a reputation for quality to grow in this market. In Ferris, we’re getting a good line of quality products and a good reputation for product durability, innovation and after-market service. We did a lot of research and were very comfortable with Ferris’ product line based on the testing we did with contractors and distributors."
David Ferris, chairman, Ferris Industries, noted the fueled demand for Ferris products and necessary increases in production capacity as the reasons for selling his company.
"A firm such as Simplicity can provide the capital and management necessary to accelerate the product development and manufacturing modernization programs planned for Ferris in the near future," remarked Ferris, who’s role in the organization will change into a more consulting one as chairman emeritus.
Another reason for the acquisition, Frazier pointed out, is that many of Simplicity’s dealers have been expanding their businesses to include professional mowers as well as residential units.
"We pride ourselves on having a strong network of independently owned retailers, and more of their time lately has been going toward the commercial segment," Frazier said. "So part of this acquisition has to do with matching the needs of our distribution. Also, growth in the big tractors that have always been a mainstay of our lines has been flat as more cutters of large acreage are using the large, riding, commercial-style machines to do the job instead."
Frazier said Simplicity’s current branding strategy is to keep the Ferris name on the commercial mowers and continue to market them through independent distribution. Plans for Ferris’ Criterion line for homeowners have not yet been determined, according to Frazier.
Ferris Industries employs approximately 120 people and has annual revenues of nearly $25 million, and the Ferris line includes a wide variety of walk-behind and riding mowers with cutting decks ranging from 36 to 72 inches in width. The company has enjoyed significant growth in the last two years due to patented independent suspension technology for riding mowers.
Simplicity Manufacturing employs nearly 500 people and distributes its consumer products, which include riding mowers, lawn and garden tractors, chipper shredders, chipper vacuums, tillers and snow throwers, through a worldwide network of independent dealers and distributors.
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