[Manufacturer News] A Massive Merger

While consolidation at the PCO level has been brisk in recent years, this same time period has been one of relative calm at the manufacturer level. That all changed in August with news that Syngenta had agreed to acquire the DuPont Professional Products insecticide business. The $125 million deal must be approved by regulators and is expected to close in the fourth quarter of 2012.

Under terms of the agreement, Syngenta receives the rights to Advion, Acelepryn, Altriset, Calteryx, Provaunt and Arilon branded products and end-use registrations, and a license under DuPont’s patents and know-how for indoxacarb, chlorantraniliprole and cyantraniliprole related to their use in the Professional Products market. Syngenta will acquire a number of employees as part of the deal, and also will access related active ingredients and formulated products from DuPont through exclusive supply and licensing agreements. The acquisition will expand the range of products Syngenta offers to the structural pest control industry and complement its current product portfolio.

DuPont will continue to manufacture indoxacarb, chlorantraniliprole, cyantraniliprole and market products containing these active ingredients, such as Coragen and Prevathon, in other markets.

An Upward Curve. DuPont’s involvement in the pest control industry will be remembered as brief, but productive. The company, which entered the pest control market in the early 2000s, had shown steady growth in a short amount of time. Utilizing vast R&D capabilities, DuPont was one of the most active manufacturers in terms of bringing new technology to market; in the last eight years, DuPont had introduced 10 branded products in 14 countries.

“DuPont has been on a strong growth curve for the past several years,” said John Bolanos, president of Univar Environmental Sciences. “When you consider they started from zero not too many years ago, they have done well at establishing some very significant products for the pest management market. I know that Altriset (their new termiticide) has not grown as fast as they planned, but overall they have had a strong stable of products.”

DuPont had found a niche offering green chemistries. Dean Burnside, CEO, Macy’s Pest Control, North Venice, Fla., said six years ago Macy’s converted its entire customer base to a green program. “Our definition of green is to only use reduced risk, minimum risk or exempt products. Very few products fit that definition until DuPont got in the game. They’ve helped us accomplish our mission.”

The Professional Products insecticide business also had assembled a strong management, sales, support and research team comprised of veteran industry professionals, including Mike McDermott, global business manger; Dave Buzzelli, marketing manager, North America; and Mark Coffelt, global development manager.

Why Sell? With a popular and growing product line backed by support that included a veteran staff and a wealth of R&D capabilities, why would DuPont decide to sell this business now?

In a letter to its customers following the announcement, Rik L. Miller, president, DuPont Crop Protection, wrote, “During the past 10 years, Crop Protection and Professional Products have been in significant growth modes. Because of this, both will require additional resources and funding over the next several years. After going through a thorough and strategic review of the businesses, we have come to the conclusion that it will be difficult for the corporation to focus on both businesses given the strategic direction we are taking.”

Several sources contacted by PCT also pointed to a costly episode involving DuPont’s turf herbicide Imprelis (a product not used in the structural market). One year ago, Imprelis was linked to widespread damage to non-target plants. Imprelis, released in the spring of 2011, controlled a wide range of broadleaf weeds with a new active ingredient — aptexor — and a new subclass of the carboxylic acid herbicides. The product gave lawn care operators a low-volume option to control a wide range of weeds. But in early summer of that year, applicators and university researchers in the Northeast and Midwest reported damaged conifers, primarily Norway spruce and white pine trees. A few months later, DuPont suspended sales of the product and EPA further banned its sale. According to DuPont’s 2012 First Quarter Earnings Report, damage associated with Imprelis has cost the company $225 million and the total cost may eventually reach $575 million.

Gary Curl, president, Specialty Products Consultants, said, “The unfortunate circumstances involving Imprelis turf herbicide made it unlikely DuPont would stay in the professional products market.”

A New Day at Syngenta. Much like DuPont, Syngenta is a global company that has tremendous research and development capabilities dedicated to the pest management market. While Syngenta offers well-established brands such as Demand, Demon, Optigard, Talon and Weatherblok, these products are more mature in their life cycle.

“Their lack of products the past several years in the U.S has made it difficult for them to actively participate in the market,” said Univar’s Bolanos. “I was aware they were looking to expand their profile with new and fresh products and this opportunity with DuPont appears to meet that need.”

The DuPont acquisition infuses Syngenta with newer AIs and formulations. Scott Reasons, head of Syngenta’s pest management business, says the acquisition presents Syngenta with a number of new opportunities. “The product line is very complementary. There is a potential. And Syngenta’s commitment to this space, I think, has been reaffirmed here,” he said. “We have some market-leading brands in Demand, and some of these acquired products either are in a leadership position — especially Acelepryn — and the others have the profile to be a leader in Syngenta’s hands and in our customers’ hands.”

Curl said based on the growth he’s aware of with DuPont’s Professional Products insecticide business he “expects the size of Syngenta’s pest control product portfolio will likely more than double following this acquisition.”

In addition to new product lines, Syngenta will benefit from the DuPont employees it will likely add, particularly its veteran field sales force. While these details have not been announced, sources told PCT that staffing is another Syngenta void that will be filled by the DuPont acquisition. In recent years, Syngenta has streamlined its sales force, relying more on distribution to drive its product sales. DuPont, on the other hand, had been adding sales reps as its product line expanded.

“DuPont has an experienced and dedicated sales team who can continue the momentum of the new DuPont products, as well as improve sales with Syngenta’s existing pest product line up,” said Chris Donaghy, president of distributor Residex/Turfgrass Inc.

At press time, there were many issues related to the merger to be sorted out. Syngenta’s Reasons said he is hopeful the transaction will receive regulatory approval by October and that Syngenta will then be able to move ahead full force with the integration. “Right now, we have to get through the next 4 to 6 weeks and hopefully close this transaction,” said Reasons. “We will start the integration planning and all of the organizational implications will come out of that integration planning.”

The consensus among industry professionals contacted by PCT is that the impact to PCOs will be minimal. Since the product lines are complementary it is unlikely that any product will be discontinued. A benefit to PCOs who already use Syngenta products is that they should receive more dedicated support from Syngenta for its entire pest product portfolio. There will be uncertainty, however, for PCOs who currently use DuPont products, but don’t use Syngenta products, such as Macy’s Burnside. “We are in a relationship-oriented business, both internally and externally with customers and vendors,” he said. “Currently we do not have relationships with anyone at Syngenta, so we’ll have to build those. Sometimes those go great and sometimes not so great. So, we’ll see.”

Burnside also is hopeful Syngenta will make the same or similar R&D commitments as DuPont. “I hope they continue to discover, explore and create new AIs, new formulations and new products to help us continue our mission in the future.”

The authors are managing editor, editor and associate editor of PCT magazine.