MKGAF Sells Agricultural Business - Analyst Blog

Merck KGaA (MKGAF) recently announced its plans to divest its Crop BioScience business to Denmark based Novozymes A/S (NVZMF) for $275 million. Crop BioScience, which researches, develops and commercializes technologies to improve plant health and crop yields, is a part of Merck KGaA's Performance Materials division.

The companies expect the transaction to close in early 2011.

The Crop BioScience business generated revenues of about €35 million in fiscal 2009, through three dedicated legal entities in North and South America – EMD Crop BioScience, Milwaukee, USA; EMD Crop BioScience Canada; and Merck Crop BioScience Argentina.

Crop BioScience's products include Optimize and Torque IF, which contain LCO Promoter Technology - a naturally-occurring molecule that brings extraordinary early-season vigor and plant health benefits to a number of crops. The Crop BioScience business became a part of Merck KGaA with the acquisition of Lipha in 1991. Additionally, the business got expanded with the acquisition of Agribiotics in 2006.

We currently have a Zacks #3 Rank (short-term Hold rating) on Merck KGaA. We are of the opinion that the acquisition of Millipore should help reduce the company's dependence on the pharmaceutical and liquid crystals sector and help build its specialty chemicals and performance life sciences portfolio. Further, with the divestment of the Crop BioScience business, Merck KGaA will be able to fully concentrate on life science, as the Crop BioScience business is focused on a specific segment within the agricultural industry, which has almost no relevance to the company's other business parts.