Seed World

S&W Seed Company to Acquire Australian-Based Pasture Genetics

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S&W Seed Company announced that it has entered into a definitive agreement to acquire Pasture Genetics Pty Ltd. The acquisition will expand and diversify S&W’s product offerings in Australia and follows S&W’s other recent initiatives in the country to become one of the leading suppliers of elite seed genetics to Australian farmers. Pasture Genetics’ seed product portfolio includes alfalfa, medic, clovers, vetch, forage cereals, as well as pasture and other grasses. Its proprietary Goldstrike seed coating technology, which can address rhizobia inoculation and extend shelf life, is believed to be a key market advantage for the company.

In fiscal year 2019, Pasture Genetics had revenue of approximately USD $20 million, capturing an estimated 15-20% of the $125 million Australian pasture seed market. Going forward, S&W expects to generate approximately 8% to 10% EBITDA margins from the newly acquired business.

The overall transaction is valued at up to $13.5 million. Initial consideration of $8.1 million consists of an upfront cash payment of approximately $0.7 million and a working capital debt refinancing in the amount of approximately $7.4 million, through a new Pasture Genetics working capital debt facility guaranteed by S&W’s Australian subsidiary. Up to an additional $5.4 million of earnout consideration is payable subject to the satisfaction of certain financial performance criteria. The earn-out payment, if any, will be payable on September 20, 2022, and is payable in a combination of cash and, at S&W’s election, shares of S&W’s common stock.

The transaction is expected to close in February 2020 and is subject to customary closing conditions.

“We believe the acquisition of Pasture Genetics will broaden our product portfolio and sales capabilities within Australia, a market where we have built out a significant presence as a provider of elite seed genetics. It also is expected to further enhance utilization of S&Ws existing assets which we believe will drive incremental value for us in the years to come,” says Mark Wong, CEO of S&W Seed Company. “Pasture Genetics’ product portfolio complements our existing sorghum, alfalfa, sunflower and wheat products, furthering our objective of being a one-stop supplier of elite seed genetics to Australian farmers.”

S&W anticipates that it can realize a number of synergies as it combines Pasture Genetics and S&W’s existing Australia operations, including:

  • Broadened Crop Portfolio: Pasture Genetics’ products complement S&W’s existing grain and forage sorghum, alfalfa, sunflower and wheat portfolio in Australia. The addition of Pasture Genetics’ products is expected to enhance the S&W product portfolio to address a full range of key Australian agricultural customers including beef cattle, sheep and dairy farmers, silage, hay and chaff producers, and grain producers.
  • Expanded Sales Reach: The Pasture Genetics sales team reaches significant additional customer bases and geographic markets in Australia. This presents cross-selling opportunities for both S&W’s existing product lines and the Pasture Genetics portfolio. Pasture Genetics has also built strong relationships with leading Australian retail channels that S&W believes can benefit from its full product line.
  • Improved Margins from Proprietary Seed Coating Technology: S&W believes that it can apply Pasture Genetics’ premium Goldstrike seed coating technology to S&W’s existing product line to add value and improve pricing power.
  • Increased Operating Leverage: S&W anticipates that it will be able to achieve cost savings in operations and administration as it integrates the businesses.

Wong continues, “We believe there are a number of synergies available as we combine Pasture Genetics and S&W. There is little crossover between the sales organizations, presenting significant cross-selling opportunities between our customer bases, and we expect to leverage S&W’s existing infrastructure for a number of operational functions. We also believe that Pasture Genetics’ Goldstrike seed coating technology can enable gross margin expansion as we look to apply the premium seed treatment to other products in our portfolio. Strategically, the acquisition of Pasture Genetics should also increase S&W’s retail store distribution, where S&W has excellent relationships with key chains.”

This acquisition continues our planned strategic transformation into a fully integrated, multi-crop seed development, production and distribution company with strong positions in an expanding number of key crops. Moreover, the financial structure of the acquisition, with 40% of the potential purchase price in the form of an earn-out contingent on performance of our integrated Australian operations, provides us with a prudent, low-risk approach to expanding our Australian market presence. We look forward to the integration of Pasture Genetics, and realization of the opportunities we believe are available to add incremental value in the future.”

Rob Damin, founder of Pasture Genetics, will be joining S&W as commercial general manager – Australia.

Damin adds, “Australia is a major producer and exporter in the global agribusiness market. At Pasture Genetics, we have built our reputation as a leading participant in this market. Our skills and resources align with the strength and reach of S&W’s operations in ways that we anticipate will enable the organization to rapidly service demands for new product offerings for customers both in Australia and overseas. We are incredibly excited about the future.”