Three Waves of global seed industry: Goes to the third round of mergers and acquisitions indicate what kind of future development direction

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Lead: article takes you understand the three kinds of fortune from acquisitions which future
Direction of development!

Wen | Liu Shi source | Chi kinds of network NOVOSEED, ID: iNovoseed Edit | Poker investor, please indicate the source

appears on the history of the world seed industry three big wave of mergers and acquisitions, the first wave of 1997-2000, lasted about three years; second wave from 2004 to 2008; the third is 2016-2017.

First Wave

This series of mergers and acquisitions is mainly due to Monsanto took the lead.
Monsanto from 1980 to invest $ 1 billion to build the world’s largest biotechnology research and development center, built in 1983.
At that time the world will never clear the future direction of development of biotechnology and potential.
In the race to the world, the Monsanto Research Center won Ghent in Belgium and the Max Planck Institute in Germany, developed the world’s first genetically modified morning glory in 1986, and leading the way in the next development.

In the biotechnology research and development on the occasion of approaching maturity, with major seed company Monsanto began commercial development in North America to talk about cooperation.
Undoubtedly all seed companies Monsanto will have first read, second look down mentality that genetically modified seed industry does not belong to the right path, so Monsanto playing with toys.
In this case, Monsanto hired McKinsey to help develop a new strategy, namely through the capital markets and lending operations, carry out the idea of ​​large-scale mergers and acquisitions seed industry.

Since 1997, Monsanto after another force, has acquired Decca, Cargill’s North American section, Holdens, Asgrow, Hartz and other major corn and soybean companies.
Monsanto merger momentum is very fierce, traditional seed industry and agro-chemical companies caused a huge impact, DuPont catch up in this situation, since 1998, merger and acquisition negotiations with Pioneer, the results hit it off.
See Monsanto and DuPont acquisition, Syngenta also join the fray in 1999, we have carried out some small-scale acquisitions.

In the year 2000, the agricultural biotechnology industry suffered a downturn in the industry, it has been consumer resistance in Europe and Japan in the commercialization process, so the market growth rate slowed in the United States, put into production
and the return on investment is much lower than expected, due to the massive use of Monsanto loan capital, asset-liability ratio is too high, thus giving a Wall Street downgrade warning, Monsanto and the industry began to shrink, the first biotechnology onset of winter
By this time, Monsanto and DuPont layout basically completed, Syngenta completed the half.

experienced 3-4 years, Europe and Japan began to accept genetically modified agricultural products, but requires a clear identity.
Industry gradually bottom out in 2004, and began to enter into the second round of M & A wave.
The second


In the second round of the wave, Monsanto acquired American Dai word cotton and vegetable seed company Seminis, DuPont do
small-scale mergers and acquisitions, Syngenta completed its acquisition of the other half; Bayer, BASF and Dow are doing some biotech and seed company acquisitions.
World agricultural seed industry formed the basis for the Group of Six Group: Monsanto, DuPont, Syngenta, Bayer, Dow, BASF.
In addition, two independent seed companies, Germany KWS and Limagrain of France.

Personally, I think, Monsanto and DuPont is a leading M & A seed company Syngenta acquisition of seed companies is second-rate, Bayer, BASF and Dow basically acquired a half to three second-rate streaming company.
Monsanto biotechnology belong to the leading class, DuPont Pioneer, Syngenta bit behind half-length, half or a first-class second-rate technology, and other companies followed.

solely on the seed industry is concerned, Monsanto and DuPont in the first group, but also the future of the two companies contend worldwide.
Syngenta is leading the second group.

The Third Wave

Third seed industry from the beginning of 2016, M & A wave characteristics are completely different.
The first was the invasion of biotech seed industry; the second was the awakening of the Group of agricultural seed company and began full merger, especially biotechnology seed companies have the ability; the third is a group of agricultural super mergers and acquisitions, namely everyone
Bayer familiar merger Monsanto, Chinese chemical industry mergers and acquisitions Syngenta, DuPont and Dow merger, this series of mergers and acquisitions involve up to 200 billion US dollars.

The third wave of mergers and acquisitions behind the mystery

traditional agriculture due to the very wide geographical distribution, soil, climate, crops, technology, cultivation and consumption habits
and so very different, agriculture is a very strong regional industry, so there is no globalization of agriculture, globalization of trade in agricultural products only.
However, due to the advent of biotechnology to overcome the differences between different categories of crops, varieties and regions, can get stronger competitive advantage based on the original, as well as promoting financial capital, there has been the following changes:

first, the global agricultural industry is taking shape, the agricultural production capacity in developed countries, agricultural productivity and production costs highly competitive, traditional agriculture has received unprecedented challenge;

the first
Second, begin to have capital to promote the agricultural financial attributes, not just supply and demand, financial speculation has become an important influence factor;

third, the advantage is concentrated, the formation of the United States and Europe, the two technology centers, and that is
North America, South America and Australia, the three resource centers and agricultural exports.

seed industry mergers and acquisitions around the world have different strategies appeal to 1996 as a watershed.
Prior to 1996, the merger between seed companies are basically oriented capabilities, integration of resources, technology and channels between seed companies, mergers and acquisitions has been in continuous development, the growth of homeopathy.
Monsanto before probably had about 300 mergers and acquisitions, but did not attract everyone’s attention; undergone a sea change after 1996, its core financial-oriented financial capital to promote global layout and barbaric growth, not only the acquisition and integration within the industry
, is cross-industry integration and expansion.

interpretation of the recent merger of the three events

1. Interpretation of DuPont and Dow combined

traditional industries lack of room for growth, we have reached a bottleneck, only enough new products to replace the old varieties.
But new screening compounds increasingly difficult, time becomes longer, the cost becomes high.
While the old enterprises lack innovation mechanism, DuPont has more than 200 years, Dow has more than 150 years of history.
These large foreign enterprises system and the bureaucracy of state-owned enterprises have many similarities, such as “political correctness” is the most important, as long as the performance justified on the line.
After the merger benefits are very obvious, it can save costs and reduce competition between each other part, and other similar cultural comparison.
But mergers and acquisitions will bring a lot of problems, even after the merger, many businesses are overlapping, needs to be cut; in addition, lack of company innovation ability, the problem has not been solved; team and business will have some turmoil.

2. Interpretation of China Chemical and Syngenta merger

The following interpretation of what China Chemical Syngenta acquisition of this matter.
In fact China was interested in participating in the merger of three agencies, namely, Chinese chemical industry, CITIC and COFCO, China’s chemical and finally win.
Syngenta ranks first in terms of agricultural trade, despite the recent decline, but still barely better than Bayer.
Its expertise and products are very strong.
In addition, Syngenta’s seed business is also very good, vegetable seeds currently ranked second or third in the world, corn seed is ranked third in the world.
In biotechnology, Monsanto came in first, Syngenta and DuPont have their own advantages and disadvantages, tied for second count it.

Prior to acquisition, Syngenta less than 20 times earnings, if delisting from Europe and listed in China, then there will be significant valuation premium.
Syngenta in technology, networks, brands, markets are very strong.
Chinese enterprises to go out of their own problems, then will be very much, but if you take advantage of the existing Syngenta many advantages, then it will take a lot less detours.
M & A potential problem is mainly management and cultural differences between these two aspects.
European companies are very serious bureaucratic, Europe and China is completely different bureaucracy.
Integration of these two systems will produce a lot of problems, and not in a few years can be solved.

3. Interpretation of Bayer and Monsanto merger

This is what I share today’s focus.
I used to have worked for many years at Monsanto, for its innovative culture have a deeper understanding.
I found a lot behind M & A Monsanto has a deep intention.
And Wall Street analysts, including many people, including the analysis is not in place, and we therefore hope for a share.

First, point the way to speak.
I think the dimension of strategic thinking determines the success or failure of future competition, rather than the degree of effort.
For example, a very complicated maze, if we ordinary people from the inside out, then takes about half a day, because we want to summarize and record it to find out the laws in the process of trial and error.
But if we go from a height overlooking it would probably only need ten minutes to put out the whole line drawing.
We are not smarter, not because we work harder, but different dimensions.

China has been very strong over the last cold weapons, but met with Mongolia and Qing cavalry inferior show, and once entered into the era of gunboats more complete failure.
This is the difference dimension.
Also tells us of the importance of our military-horizon attack capability, phased array radar, strategic missiles, aircraft and other weapon.

< p> ▲ source Liu Shi

Why talk about those too, because in fact for the future application of some of the trends of agricultural development and new technologies, I believe that in order to Monsanto as the representative of some foreign companies than we really want to advance
a lot of.
Here are some pictures, above a picture to tell us how many new technology after another to launch a picture below to tell us how these new technologies work.
But I think explain the two maps are too simple, and did not explain where the core.

Connotation development of modern agriculture

▲ source Liu Shi

bottom left to right are: investment in agriculture, open large-scale agriculture, closed
type of facility agriculture, logistics and agricultural markets.
We look at what is called the agriculture of things.
Things agriculture it is mainly in terms of facilities for agricultural closed, is a “numerical control system.”
First, it has a basic model, then there will be some probe, collecting data points, including terms of temperature, humidity and the like.
After these facilities will collect data, and, after conducting and analysis of data light, temperature, and adjusted to optimize the water.
Things are controlled by contacts and links between different objects.

So the wisdom of agriculture and precision agriculture is how it happened?
Agriculture is the wisdom and decision-making to optimize the data model on the basis of “expert systems”; precision agriculture is in operation and the implementation process, to achieve precision in different operating environments, is an “operating system.”
Agriculture is big data refers to how to catch in an open environment in these data, how to build your own database, how to build a basic model and in-depth study to optimize the model and help make decisions about the fight, it is a “data and
decision-making system. ”
Agricultural data, the agricultural things, the wisdom of agriculture, precision agriculture concepts, many are confused in the agricultural sector, government departments, enterprises and investment institutions, so I’ll put these concepts clear rationale, and the following contents for the next

From the direction of research and development of advanced individual foreign companies, especially Monsanto’s strategic layout point of view, I believe that a new “agricultural operating system” is taking shape.
Because inspired by Apple’s iOS system, I named it “AOS” (Agriculture Operation System).

What is new agricultural operating system (AOS)

▲ source Liu Shi

currently, including many Chinese are the first country in accordance with experience to produce many different crops
agricultural products, and then to the market to sell.
In this system, the AOS is reversed: first, the producers will decide the number of crop production category according to the system of forecasting market demands


The first
two steps, with the corresponding calculation is carried out according to the decision established data model (including weather, soil, etc., historical data, etc.), so as to form the final category and model species planted;

the third step,
planting model determines two aspects: 3-1) seeds, fertilizers, pesticides and other inputs, including the number, species, ratio, and other input mode; operation 3-2) agricultural production.
Core processes operating mainly two: namely, agricultural and irrigation.

The fourth step, through the system of remote sensing data, base station data, data acquisition and data chain production process to continuously improve and optimize the iterative data model; a fifth step, the pre-agricultural
output data matching and fuse to form a business model with warehousing, logistics, processing, channels, marketing, consumption, and thus in turn guide the ratio of investment and category of planting process.

The system is not as in the past put great emphasis on maximizing the volume of production, but stressed that moderation and moderation.
That is, if the demand is limited, then the production will form too much inventory, but profit will be reduced.
The core component of this system is its data model, three basic components cultivation model and business model, rather than upgrading a particular product or technology.
In the whole process of planting, keep the growth process of data input into the data model and planting models, real-time updates.
Throughout the system data, materials, production processes, logistics systems, and financial markets fully integrated into one.

financial integration is mainly reflected in four aspects:

1) is pre-loan demand, amount, interest rates and future earnings expectations;

2) agricultural machinery
and investment and financial leasing irrigation equipment;

3) agricultural production insurance;

4) agricultural products and futures hedging operations.
Farmers and the entire process can be summarized in the pre-production operation can be carried out in agricultural futures, choose to sell a percentage of future earnings.

This AOS system value is enormous, as the central “prescription is.”
After the formation of this system, the company’s technology and other agricultural products will become the system of “material”, a suitable variety of “herbal shop.”
Agricultural companies will become wage earners.

new agricultural OS AOS basic elements and logic

1 according to the demand forecast market to produce the category and quantity of agricultural products;.

< p> 2 in the cultivation of large data based model determines the category of production inputs, the number, ratio, and input mode;..

3 crop growth data output, processing, logistics, and consumption channels
data to be an effective part of the entire cultivation and business models.
That is an effective part of agricultural data not just agricultural production, logistics, consumption, and the entire financial system is AOS.

4 to establish a standardized and interactive system data, all supporting agricultural machinery can receive effective instruction to complete the work;.

“deep learning” capability 5.AI will determine the AOS
the development speed and quality;.

6 full integration of financial capital and the gradual penetration.

7.AOS matures, you can begin to commercialization.

Summary: comprehensive evaluation of the three major acquisitions.
DuPont and Dow acquisitions: pass.
Focus on efficiency and cost of traditional acquisition, is still “heating”, the lack of innovative thinking; for the Chinese chemical industry mergers and acquisitions Syngenta, its value is received technical, material, network and brand, the challenge is to integrate the management and promotion,
prevent indigestion.
For China, this acquisition is valuable; Bayer merger Monsanto, Bayer provide a comprehensive solution has a strong sex ratio, but limited tolerance to the traditional culture of innovation culture, because Bayer is a very traditional company.
Whether the “European lady” to harness “American cowboy” remains to be seen.

Other Seeds

worth talking about only three, Seminis, KWS and Limagrain.

(1) Seminis: the world’s largest vegetable seed company, originally by the integration of many small financial capital of listed companies, was the capital of the success stories.
And later acquired by the Mexican consortium, and later acquired by Monsanto.
Because vegetable business category, the market is chaotic, strong regional.
Overall, Vegetable Company is not suitable for large companies operate, because the big companies focused on the operational requirements of the decision, which will slow down decision-making and aging effects.
The company may become the object of Chinese institutions mergers and acquisitions, because China is the world’s largest vegetable market.

(2) KWS is a traditional conservative family business, doing business very solid, serious, but does not seem willing to cooperate with external agencies.
KWS is not a good acquisition targets, mainly cultural differences, but nor is it can not do mergers and acquisitions.

(3) Limagrain: objects seem inappropriate to do mergers and acquisitions, as it is started from a French farmer cooperative enterprises, have received a number of grants preferential policies in France.
If acquired, then institutions may need to be accepted by government subsidies in the past to withdraw, so great difficulty.

part of the business of CITIC Industrial Fund to acquire Dow Brazil

Dow mergers and DuPont, because antitrust reasons he needs to release itself some business,
the opportunity to bring some mergers and acquisitions.
The acquisition of focus, I understand that investment income is there, because of the low price-earnings ratio of foreign and domestic mergers and acquisitions came to him immediately able to obtain the corresponding higher capital gains.
Also part of oil sunflower and corn have some resource value, specifically to look at this.
Personal judgment of these resources may be incorporated LPHT in the future, you can help LPHT do better.

Q & A

1, the United States and Europe gave birth to the world’s agricultural giants, both the seed industry or agricultural, do you think
there are no domestic companies have the potential to grow into an international giant or market?

China appears seed industry giants possibility is very small.
Now dominating the world agricultural development, there are four main elements: The first is a matter of resources; second is bio-technology, whether it is the first generation of Monsanto’s transgenic technology-led, or second-generation gene editing technology, agricultural third
large data, gradually forming a fourth AOS system.
Currently these four terms, China does not have a competitive advantage.
Domestic rice germplasm resources may have certain advantages, but although rice is a major crop in the country, but the world is not a major crop.
For soybeans, the country has some wild germplasm resources, but domestic-related research and development far behind, unable to make up for the short term, this is not widens already is lucky.

in terms of resources, technology, data, or AOS system, China is far behind, and for domestic-related issues are lack of understanding.
China is not known which way to go, but foreign countries have come a long way in the right way, so I think that this gap may be widening.

an obstacle to Chinese enterprises to go out commonly encountered is the lack of understanding of the other aspects of the country’s business environment, legal environment and culture, this disadvantage makes the Chinese enterprises to go is basically luck, touch
well, okay, in general are bad touch.
And domestic enterprises always wanted to developed countries, we do not think there is a certain advantage in developed countries, but the business environment and an unstable political environment and other developed countries, so that some of our investment may suffer great losses in the future twists and turns
I think this is plain understand the business of our investment failure much more than success, especially in government-led projects, defeat more.
I think going out of caution, once where what is politically fluctuations country, can make investment down the drain before.

2, has a wealth of experience in your industry terms of species currently on the domestic seed industry leading companies to see how future growth?

From the research point of view, the current domestic Denghai and Longping potential of the two companies is good, also has a relatively scientific research into the system.
Denghai Seeds R & D is started, although there are some problems in the construction of the system, but they have developed a good foundation, everywhere, in terms of corn is a significant advantage.
In terms of rice, Long Ping High-Tech is also to be significantly better than other companies, although there are some varieties are not developed its own, but its own research and development of more than half of the species, but also self-contained, rice seed companies in the country is
more prominent.
To make money by buying a variety of words or unreliable.
The third is the industrial data for DBN understanding is more advanced, do relatively solid.
Short-term investments can be obtained much revenue I do not know, but in 2 to 5 years, I am still optimistic about these three companies.

3, you mentioned that Monsanto’s agricultural AOS system, now Monsanto regarded the system to what extent, if this system is so successful, in the future, including Chinese seed companies in the world inferior
fate can not be change?

In particular they did what extent I do not know, which is its core secrets, and they have the information and no external stresses.
I saw him during layout, and gradually outlines its strategy outline.
He has been updated agricultural data, and data model, gradually forming stage, I estimate 2–3 years to be able to mature.

Too many dimensions of agricultural data, a number of factors are likely to have a significant impact on the results.
Because too many variables lead to traditional expert systems it is difficult to draw effective program.
Without basic data model there is no operational model.
AlphaGo last year’s victory was a landmark event, under the new system, more complex models will gradually clear, and continue with the latest iteration of the data and update the model.
I estimate 2-3 years will be formed.

After this molding system, all agricultural companies will be reduced dimensional, three-dimensional space to be hit from two-dimensional space, before getting in the larger context of the data may not be reliable,
and this system can tell us what technologies and products can fit through how to be able to get better results, beyond the traditional experience and limited data.

If Monsanto can succeed, all companies will be affected.
Of course, he was able to do in Europe or South America, success does not necessarily mean success in China, because there is no corresponding data in China, the model can not really landing.
China’s agriculture in a relatively closed environment or a certain living space, but the whole agricultural cycle in the future is a big international market, the competition will become increasingly fierce.

4, how do you see the domestic release genetically modified?

I said five years ago could possibly be open in 2018.
I think in China transgene is not a scientific question, but a political problem.

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