S&W Seed Company and Corteva Agriscience announced they have entered into a new mutually beneficial alfalfa agreement that terminates and replaces the December 2014 agreements between S&W and Pioneer Hi-Bred International, Inc. As part of the new agreement, S&W will receive $45 million in cash at closing plus $25 million in payments over regularly scheduled dates concluding in February 2021.
Pioneer will exit its 2014 agreements and related obligations and receive a fully pre-paid, exclusive license to produce and distribute certain S&W-owned varieties. In addition, as part of the agreement terms above, Pioneer will receive seed inventory from S&W with a book value of approximately $25 million and assume certain grower production contract rights and obligations. Full terms of the agreement were not disclosed.
Mark Wong, President & CEO of S&W Seed Company, comments, “We believe this is a tremendous agreement for S&W. This transaction allows S&W to pursue additional high-value growth opportunities consistent with our objective of building a leading integrated middle market agricultural company. The transaction significantly improves our financial position and strategic flexibility at a time when we believe there are a number of attractive potential acquisitions in the seed industry.”
S&W retains ownership of all assets originally acquired in the December 2014 asset purchase transaction between S&W and Pioneer, including alfalfa varieties and germplasm, research and development capabilities, and production facilities.
“We are retaining alfalfa operations that are well-positioned for growth in the U.S. and around the world,” Wong says. “Importantly, the agreement allows us to sell our next generation alfalfa varieties into our farmer-dealer network in the U.S. and proprietary distribution channels, allowing our customers to benefit from years of leading-edge development.”
Drew Porter, Global Alfalfa Portfolio Leader for Corteva Agriscience says, “Alfalfa continues to be an important part of our seed product lineup, particularly for our Pioneer, Dairyland and Alforex brands. The 2017 DowDuPont merger included heritage Dow AgroSciences alfalfa seed production and research assets, as well as established sales channels. By keeping Pioneer brand alfalfa seed research and manufacturing capabilities in-house we are able to significantly lower our cost of goods, improve return on invested capital for our seed business and continue to serve customers with leading alfalfa products.”
“This new agreement, which essentially accelerates the cashflow of the next five years of minimum contractual obligations and further compensates S&W for the upfront licensing of certain varieties, significantly improves S&W’s financial capabilities,” says Matthew Szot, Chief Financial Officer of S&W Seed Company. “Following the close, S&W will boast more than $45 million in additional net working capital and tangible book value. We look forward to redeploying capital in a prudent manner that aligns with our core long-term focus on building a growing middle market agricultural company.”
Wong concludes, “Over the past few years, S&W has significantly transformed itself from a pure play alfalfa seed company into a fully integrated, multi-crop seed development, production and distribution company with strong positions in sorghum, sunflower and alfalfa. We have realigned our sales organization, acquired a highly leverageable U.S. farmer-dealer network, continued to drive efficiencies in our production processes, and accelerated development of next generation trait technologies. Today’s announcement allows us to continue and potentially accelerate our strategic transformation.”
Source: S&W Seeds
