Ann Crotty
The proposed transaction between South Africa’s Pannar Seed and US-based Pioneer Hi-Bred International was necessary if Pannar Seed was to reverse its declining competitive position in the crucial area of maize breeding, Pannar Seed deputy chairman Michael Yeadon told Business Report yesterday.
Yeadon said that the 53-year old family-run company had elected to sell a stake to Pioneer in order to ensure that it would have access to the technology and scale needed to remain at the forefront of the rapidly changing maize-breeding industry.
In a statement issued to the Competition Tribunal, lawyers acting for Pannar noted that due to its smaller scale – relative to powerful global companies: “Pannar cannot justify and make the investments in research and development that are necessary in today’s technologically sophisticated environment, where access to advanced breeding technologies is essential to remain competitive.”
Last December the commission prohibited the merger on the grounds that it would substantially lessen competition in the maize seed market in South Africa. The transaction, which is classified as an intermediate merger, is currently being heard by the Competition Tribunal following an appeal of the commission’s decision.
The merging parties requested the tribunal to reconsider the merger on the grounds that the commission had erred in its decision. They have asked the tribunal to unconditionally approve the transaction. However, last week they suggested a number of conditions that could be attached to the tribunal’s approval, which the merging parties believe would address the commission’s concerns.
The details of the conditions have not been made public but one is believed to address the need to ensure access to locally adapted germplasm developed by Pannar. A second condition attempts to deal with the commission’s concerns that the transaction will result in significant price increases, in the order of 19 percent.
The merging parties, who argue that price increases will be minimal, are believed to have suggested attaching a price cap condition.
Yeadon would not confirm the details of the suggested conditions nor would he give details of the value of the transaction, pointing out that Pannar was privately owned.
The merging parties’ lawyers, described the proposed transaction as a “major foreign investment in the South African agricultural sector and Pioneer’s largest investment outside the US ever”.
“The combined firm would justify immediate investment into South Africa as one of Pioneer’s four major research hubs for advanced breeding outside of the US, along with Brazil, India and China,” it added. Yeadon would not specify what sort of sums would be involved but stressed that they would be “substantial and ongoing”.
Representatives for Dow Chemicals and Syngenta, who appeared at the tribunal hearing yesterday, said that the conditions suggested by the merging parties would not address the commission’s concerns.
They also said that suggestions that Pannar would fail in the absence of the transaction were inaccurate as both Dow and Syngenta were interested in doing deals with Pannar.