In late November, BASF purchased privately-held Becker Underwood for $1 billion, making the world's largest chemical company an instant leader in biological seed treatments as well as seed treatment colorants and polymers, an area where BASF already excelled.
It was another sign that multinational companies see a strong future for global agriculture and are doubling down on that commitment through mergers and acquisitions. More directly, the purchase signaled that BASF wants to be seen as a leader in sustainable agriculture with an emphasis on biologicals.
"We are entering the era of biologicals and harnessing their power in agriculture," said Peter Innes, Chairman and CEO of Becker Underwood. "We believe by 2020 the market will be worth $8 billion, so it's a big prize"
For farmer-customers it will be business as usual. No big changes are expected in brand names. Going forward, company officials on both sides of the deal say this will strengthen biological seed treatment product lines as farmers look for new ways to grow yields in a sustainable way.
Agriculture has been able to meet increased demand with crop protection products, fertilizers and plant breeding, added Innes, "but the world requires new yield-enhancing technology. We strongly believe the biologicals represent a good opportunity to increase yields."
Most of Becker Underwood will join BASF's newly formed Functional Crop Care division, part of the company's Crop Protection division. BASF will merge its existing research, development and marketing activities in the areas of seed treatment, biological crop protection, plant health, as well as water and resource management, with those of Becker Underwood. The goal is to successfully integrate the two companies by end of calendar year 2013.
"We will strengthen our sustainability strategy with a biological product portfolio," says Jürgen Huff, BASF senior vice president in charge of the new business unit. "This will put BASF in a different league regarding biologicals. We are joining forces to use synergies that benefit our customers."
~~~PAGE_BREAK_HERE~~~Huff says Becker Underwood was a "perfect portfolio fit" for BASF. "We don't compete, we complement," he says. "For us an important factor was Becker Underwood's strong research capability, pipeline and ability to commercialize that pipeline. And the Becker Underwood team will be able to capitalize on BASF resources and competencies."
Becker Underwood may not be a household name in agriculture, but the company is a leader in biological seed treatment, with 10 manufacturing facilities across 12 global locations, primarily in North and South America. Its core competency is fast commercialization of novel biological products for Ag and other markets.
The biological business came to Becker Underwood in 2000 when the company purchased MicroBio Group, a leading UK-based provider of inoculants, nematodes, biological seed treatments, and biopesticides with presence in Canada, the U.S., the UK, mainland Europe and Latin America. Over the years the challenge was trying to identify a beneficial microbe, explained Innes, but the company developed a screening process along with methods for formulating and fermenting those products.
The company's success rate skyrocketed around 2010 when it introduced bio-stacked products through proprietary research that combines complementary biological components to achieve greater yields in multiple crops. Competitors have been unable to replicate and commercialize as effectively as Becker Underwood.
According to the company, independent trials show a 3.9% yield advantage in U.S. corn yields and a 5.8% yield advantage in U.S. soybean yields when farmers use Becker Underwood biological seed treatments such as VAULT HP. According to Innes, the product costs only $4.40 per acre, but can return 2.2 bu. more per acre, or approximately $30 per acre in value.
"Yield increases for soybeans are clearly visible with biologicals," he says. "That resonates with our growers."
Biologicals have been sold to soybean farmers for 100 years, he added. "There is an established market and understanding that it is possible to take a biological and convert it to a product that gives a measurable yield response," said Innes. "We've had biological products introduced into Ag that have been underdeveloped so we have had to overcome a healthy skepticism. So for us, we need to make our products consistent and be able to measure yield response.
"I do think there is generally a much greater acceptance now than even two or three years ago," Innes concluded. "We feel strongly we are entering the age of biologicals, to really be able to harness that product, in combination with what BASF brings to the table."