Syngenta Buys Valagro in First Mega Deal in Biostimulant Segment

Syngenta is delivering on its Good Growth Plan and investing into evolving production systems that are increasingly influenced by consumer preferences with the acquisition of leading plant health company Valagro.

Basel-based Syngenta Crop Protection purchased Italy-based Valagro, which has 12 subsidiaries around the world including a significant footprint in Europe and Latin America. Valagro will continue to operate independently and will retain its management team, employees, facilities, and operational independence. Financial terms of the deal were not disclosed.

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Valagro’s reported revenues in 2019 were about $175 million, representing about 9% of the $2 billion global market value of the biostimulant segment, according to data by research consultancy DunhamTrimmer, which tracks the segment.

“This transaction legitimizes biostimulants as a necessary and effective crop input,” DunhamTrimmer Managing Partner Mark Trimmer told AgriBusiness Global. “When a major crop protection company buys the leading biostimulant company in the world, it shows that it is an important part of the tool box that all growers need. It also says that if companies of this size and scale are in play, then all companies in this segment are in play for potential M&A activity, and we think there will continue to be these kinds of transactions the rest of the year.”

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The biostimulant segment has been growing at double-digit annual growth rates for the better part of the last decade, and that growth is expected to continue at 10%-12% CAGR during the next five years and will double in value by 2025, Trimmer says.

Despite the segment’s explosive growth, consolidation has been slow as companies struggle to prove efficacy and differentiate products in a class that is largely made up of humic and fulvic acids, seaweed extracts, and organic material. But the agronomic science has matured to illustrate their benefit to plant health, mainly allowing plants to fight environmental stress and form better-quality fruit. This evolution in efficacy studies is an important reason traditional crop input companies like Syngenta are willing to invest in the space, which is also benefiting from consumer preferences for lower-input production systems.

“Now is the opportune time (for this acquisition) for a couple of reasons,” says Corey Huck, Global Head of Biologicals for Syngenta. “Consumers are asking for something different. They want to know more about how their food is produced. They want to know more about where the plant was grown, how it was grown, what kinds of stress did it overcome, and where can it be traced back to. So there are a lot of consumer-driven reasons to do this, and now the science is matching that demand and becoming more relevant … The science is absolutely catching up right now on what the consumer is asking for so it’s a nice crossroads of those things happening.”

Valagro, which also develops micronutrients as part of its plant health portfolio, has invested heavily into its R&D and efficacy trials during its 40-year run. Valagro’s level of investment is progressive, perhaps even unusual for the segment, which is one of the reasons they were attractive to Syngenta.

Valagro co-founder and CEO Giuseppe Natale says the Syngenta organization will allow Valagro to leverage resources to continue its investment into new product development and efficacy.

“Today, we are at a tipping point in the biological industry,” Natale told AgriBusiness Global. “We have important needs to improve productivity and sustainability in agriculture. There is huge opportunity in the market, and we can deliver something impactful with R&D. The resources that are needed are massive. This is not a business that can grow incrementally. This is the time of disruption … Joining the resources and capabilities of Syngenta could speed up, in an impressive manner, our pipeline and all the activity we have in place.”

What It Means for Agriculture

At the heart of biological product integration is a rethink of production systems. If we bolster plant health, we mitigate the need for reactive pest control chemistries and blanket fertilizer applications. The results are production systems that maintain their productivity with fewer chemical inputs that are increasingly scrutinized by regulatory systems around the world. Strict regulatory environments in the EU have generated heightened adoption of these plant health products, and many see regulation that drives adoption as an inevitability that will alter farming practices around the world.

Syngenta, directed by its Good Growth Plan sustainability initiative, positions itself on the leading edge of integrated portfolios that can adapt to changing systems and deliver solutions for farmers. The drivers behind the change, including consumer demand and climate change, are expected to accelerate and force other input suppliers to update their portfolios with more of a holistic approach to agronomy.

“For Syngenta, climate change is becoming more obvious and real every day and every season, so that is a factor in this need for sustainability and driving how that becomes part of our farming practices and more ingrained in what we do,” Huck says. “Part of the Syngenta’s Good Growth Plan is investing $2 billion into sustainable efforts, and this is a big part of that.”

More acquisitions are likely in this space. Huck also heads Syngenta’s Global Ventures, an investment arm that targets new technologies and acquisitions. Previously he was VP of Business Development for AgTech Accelerator, which helped startups and technology companies analyze markets and commercialize products. That perspective will help Syngenta analyze additional opportunities in a fragmented startup environment.

“We’ll continue to invest in proprietary R&D, and Valagro has much of that,” Huck says. “We look at external (technologies) as well. There are over 3,000 startup companies right now invested in by 1,350 unique investors that were not in ag before. You find a lot of science meeting capital now, and that didn’t happen before. We’ll be tapping those early stage companies and technologies. Biostimulants and micronutrients are the core of Valagro. At Syngenta we’re bringing to the party some biocontrols and biostimulants as well, and we’ll build out a portfolio of nutrient-use efficiency, microbials, pheromones, and other really exciting technologies right now that we can tap into. And that’s the longer-term strategy.”

Part of its acquisition strategy will fall to Valagro as well as it continues to develop production capacity and infrastructure around the world.

“Combining the two companies, we cover the entire value chain and have a tremendous ability to screen external or startup technologies that could eventually be available in the market for discussion and collaboration,” Natale says. “We’re still in the front end of what biological products can really do and it’s an evolving area of some really great science and technology and capability. I think we’re in the early stage of it, but it will be a bigger part of the growers’ decision making going forward than it is today.”

As adoption continues to percolate through the retail chain and farm level, analysts expect more consolidation and investment from traditional agriculture companies to transform a burgeoning segment into a mainstream staple for farm production.

“Conventional chemicals played an important role in increasing productivity. But I think it’s clear that we’ve achieved the ceiling in that productivity,” Natale says. “I’m thankful for what the conventional chemical industry did for improving productivity, but today we’ve achieved the ceiling. With integrated crop management, we can do much better to explore the genetic potential of the crop in a way that is sustainable in how we produce our food. So biologicals have an important contribution to give to the world.”