Global grass and seed giant to extend its reach in Australia and NZ

Sheep Central, February 15, 2019

THE world’s biggest pasture grass and clover seed company – DLF Seeds — is set to increase its market reach after it received important Australian and New Zealand regulatory approvals for its NZ$421 million acquisition of PGW Seeds this week.

Yesterday the ACCC said it had decided it will not oppose DLF Seeds’ proposed acquisition of PGG Wrightson Seeds. This followed a clearance decision issued by the New Zealand Commerce Commission on 13 February 2019.

DLF Seeds is owned by a Danish co-operative and is regarded as the world’s largest seed company involved in the breeding, production and sale of temperate grass and clover species, and fodder beet.

PGG Wrightson Seeds Holdings Limited is a subsidiary of PGG Wrightson Limited, a New Zealand-based public seed company that develops, breeds, and supplies seeds in Australia and New Zealand, and exports to other international markets.

PGG Wrightson’s deputy chairman, Trevor Burt has said the commission clearance decision was another positive step as the transaction moves closer to settlement. The deal has already received strong support with an overwhelming 96 percent of PGW shareholders who voted casting their votes in favour of the proposed transaction, he said.

Acquisition to open up new markets – PGW

With the ACCC clearance, the DLF-PGW agreement now only remains conditional upon:

– approval under the New Zealand Overseas Investment Act;

– change of control consents from certain PGW Seeds’ joint venture partners; and

– the completion of required regulatory filings in Uruguay.

It is not known how the acquisition will affect staffing levels or research and development in the PGW Seeds network in Australia. An Australian Seed Federation spokesperson said the ASF did not comment on company commercial transactions. However, Mr Burt has said the agreement would deliver significant value to PGW and enable the PGW Seeds business “to benefit immensely from being part of an impressive global seeds operation.”

PGW chief executive Ian Glasson said the transaction follows the continuing trend of consolidation in the international seeds industry and there are clear benefits that arise for PGW and PGW Seeds. Ownership of PGW Seeds by DLF Seeds is expected to expand the opportunities for commercialisation of the intellectual property the business has developed and will continue to develop. DLF Seed’s global presence will open up new markets and geographies, increasing royalties coming into New Zealand, and also demonstrate the benefits of the research and development focus of PGW Seeds’ business, PGW said.

“Domestically in New Zealand, PGW and PGW Seeds will continue to work closely together under common branding as the market leader in relation to our respective Rural Services and Seed and Grain offerings.

“The PGW Seeds team, who are highly regarded in the industry, are key to the success of the seed and grain business,” Mr Glasson said.

“This team will continue to operate as they do currently, allowing the strong relationship that exists between them and their customers and the PGW team to continue adding value for our clients”.

DLF Seeds chief executive Truels Damsgaard has said DLF Seeds has long viewed PGW Seeds as a strategic and complementary business to DLF Seeds’ current operations.

“We see PGW Seeds as the leading temperate forage seed player in the Southern Hemisphere, with DLF Seeds occupying a similar position in the Northern Hemisphere.

“The transaction presents a real opportunity for value creation as a combined business with a strong global offering for our customers.”

Acquisition unlikely to result in substantial competition loss – ACCC

The ACCC said DLF Seeds and PGG Wrightson Seeds are active in Australia in the production and supply of forage seeds, which are used for grazing livestock, and turf seeds.

ACCC deputy chair Mick Keogh said the ACCC found that it is unlikely that the proposed acquisition will result in a substantial lessening of competition in any market.

The ACCC’s investigation focussed on competition in the market for a specialised product in which both companies are active: the market for perennial ryegrass seeds containing fungi, called endophytes.

“The ACCC believes that a combined DLF Seeds/PGG Wrightson Seeds will continue to face competition from remaining suppliers, including large global seed producers such as Heritage Seeds.”

“Most farms which undertake high intensity grazing sow their pastures with a variety of forage grasses, and do not rely solely on perennial ryegrass incorporating novel endophytes,” Mr Keogh said.

The ACCC also assessed whether a reduction in competition would have negative impacts on seed research and development (R&D).

“Seed R&D is a constantly evolving process, and producers continually seek out new ryegrass seed products with improved forage qualities.

“We did not consider that the proposed acquisition would be likely to lessen competition in R&D aimed at developing new seeds,” Mr Keogh said.

DLF Seeds aims to purchase 100pc of the shares of PGG Wrightson Seeds Holdings Limited and thereby acquire substantially all the assets and operations of the PGW Seed and Grain business in New Zealand, Australia, South America and internationally.

PGW and PGW Seeds will enter into a long-term distribution agreement for seed and grain. PGW will grant a brand licence to PGW Seeds for the continued use of the PGG Wrightson Seeds brand. PGW will also continue to provide a range of corporate functions and back office services to PGW Seeds for a transitional period of between 12 and 18 months.


Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.


Get Sheep Central's news headlines emailed to you -