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Dec. 5, 2022 by Shane Thomas, Upstream Ag Insights Corteva has been emphasizing their desire to build out the biological muscle of their business since new CEO Chuck Magro taken over the helm. This week, Corteva announced the biggest biostimulant acquisition they have made, purchasing Stoller for $1.2 billion in cash. This price represents an enterprise value multiple of 12x based on Stoller's expected EBITDA for 2022, according to the release. Knowing that they have annual revenue of $400 million we can work back that Stoller delivers around $100 million in EBITDA, meaning they have about 25% operating margins. These margins will be part of what is welcomed considering Corteva had around 16.5% operating margins in their business in 2021 (given the recent changes and cuts to their business, this will be higher for 2022). For context on valuation, one of Stoller's leading competitors globally is Valagro. Valagro was acquired by Syngenta in 2020 when Valagro had revenue of $175 million for about $600 million. I am a fan of the acquisition. I noted Stoller as one of the acquisition opportunities for Corteva in my breakdown of the 2021 Corteva Annual Report because of their scale and strength in the biostimulant space. Notably, I also highlighted Marrone Bio and Verdesian Life Sciences. Marrone Bio has been acquired (by Bioceres out of Latin America) and now Stoller has been acquired. Verdesian is private equity owned (AEA Investors) and though they were acquired within the last 2 years, there are likely interested groups (competitors to Corteva and even more likely, fertilizer players) looking at them for their strong nutrient use efficiency line-up. Another group that will be interesting to watch is Acadian Plant Health. (For reference, here is a link to a 2020 edition of Upstream Ag Insights that has some useful images outlaying the biostimulant company landscape.) Benefits of the Acquisition There is a host of reasons this acquisition makes a lot of sense for Corteva. The tail winds in the direction of biostimulants that leads to the Corteva view that "the Biologicals market is expected to grow high-single digits annually through 2035 representing approximately 25% of the overall crop protection market by 2035" is just one component along with the margin opportunities mentioned earlier. There are many other benefits for Corteva with Stoller in the market though. Leveraging Distribution Access - Corteva has one of the strongest distribution networks in North America (elsewhere too, but concentrating on NA) with not only significant relationships with the largest retailers and distributors, but their own seed dealer network. The dealer network is interesting for two reasons: 1. Having the significant market share that they have in seed, there is a natural route to applying the Stoller biostimulant products onto their seeds as seed treatments. 2. I may be wrong here (this also could be a more western Canadian biased view), but at some point one has to think there is opportunity to empower their seed dealers to sell more than seed. One current challenge is that with traditional chemistry there are regulations on warehousing standards. Micronutrients and biological products are typically not bound by these same regulations and standards, meaning the ability to put up a shed to store product becomes much easier and more cost effective. Co-formulation, Co-packaging and Co-Promotion Tank Mix Influence Untreated Acres and Low Cannibalization Carbon Program Challenges To view the entire article click here. Tweet |
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