2nd UPDATE: BASF to Buy Seed-Technology Company Becker Underwood

--BASF acquiring Iowa seed-treatment company

--$1.02 billion deal expected to be complete by year end

--Becker makes natural-based pesticides

--Deal continues trend of consolidation in sector

(Updates with executive comment, background on recent deal.)

 
   By Ian Berry and Harriet Torry 
 

German chemicals company BASF SE (BAS.XE, BASFY) agreed to acquire U.S. crop-technology company Becker Underwood for 785 million euros ($1.02 billion), in a deal that would continue consolidation in the seed-treatment market.

The deal would bolster BASF's existing business in crop protection, including chemical coatings and other treatments applied to seeds before they are planted to protect crops from pests and other harm.

BASF would acquire Ames, Iowa's Becker Underwood from private-equity company Norwest Equity Partners, which has owned the seed-treatment company since 2004. The deal is expected to close at the end of the year, pending approval by antitrust regulators, BASF said Thursday.

The planned deal comes as a global agriculture boom is being driven in part by rising incomes in China and other emerging economies. Higher prices for corn and other crops are encouraging farmers in the U.S. and elsewhere to invest in new seeds and other technologies designed to increase yields and revenue.

Becker Underwood, founded in 1982, is expected to generate $240 million in annual sales for the fiscal year ended Sept. 30.

Seed treatments, which protect corn, wheat and other major crops in the early stages of growth, represent a $2.5 billion annual industry expanding by 10% to 12% a year, Jefferies & Co. said in a research note Thursday. About 25% of industry sales are in the U.S., according to Jefferies.

Although Becker's main business is in the U.S., BASF plans to use the company's technology to enhance offerings around the world, especially in South America, Europe and parts of Asia, BASF officials said. BASF plans to integrate the majority of Becker Underwood's business into BASF's crop-protection division.

"We see it as a very complementary acquisition, one that really broadens our portfolio," Nevin McDougall, BASF's senior vice president for North America crop protection, said in an interview.

BASF's rivals in the segment include Bayer AG (BAYN.XE, BAYRY) and Syngenta AG (SYT, SYNN.VX).

BASF's planned acquisition would follow similar deals in the seed-treatment segment, including Bayer's recent purchase of Agraquest and Novozymes AS's (NVZMY, NZYM-B.KO) 2010 acquisition of EMD/Merck Crop BioScience Inc., Jefferies said.

The deal could strengthen BASF's presence in biopesticides. Biopesticides are derived from molecules found in nature, and have been a new focus for companies such as Monsanto Co. (MON), which earlier this year created an agricultural-biologicals division. Companies are expanding in that segment in response to critics, such as environmental groups, that argue fertilizers and pesticides are used excessively in modern agriculture. The new push in biopesticides is also a response to growing problems with pest resistance to existing technologies, industry officials say.

On Monday, Syngenta said it had reached a deal to buy U.S.-based Pasteuria Bioscience for up to $113 million. The two companies have already been collaborating on a system that would control parasites using a naturally occurring soil bacterium.

Becker Underwood calls itself the world's largest producer of "beneficial nematodes," which are tiny worms that can help control pests such as weevils and moths.

BASF's Mr. McDougall said the long-term value of the deal is in the two companies' ability to develop new technologies.

"We see the real payoff coming from synergies and product development," he said.

Mr. McDougall said the acquisition also complements BASF's existing work on products that enhance nutrient and water management, enabling farmers to use less water and fertilizer.

Write to Harriet Torry at [e-mail]

and Ian Berry at [e-mail]

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