Chemical company DuPont (DD, Financial) is all set to buy California-based Microbiome discovery company Taxon Biosciences Inc. for developing biological crop products and take a strong lead in the emerging agricultural sector in the country. The deal is said to close by end of second quarter, but the financial terms have not been disclosed yet. DuPont expects to increase revenues through Biological sales, which were more than $1 billion last year.
Advantages of the deal
Founded in 1802, DuPont was initially a gunpowder mill, which developed polymers later on, developed a series of environment friendly products. In 2014, the company was declared as world’s fourth largest chemical company based on market capitalization and the eighth-largest based on revenue.
Taxon Biosciences Inc. is the pioneer in the industrial microbiome field and uses proprietary advancements in Genomics, bioinformatics and microbiology for the purpose of identifying, resolving, validating and commercializing microbiome-based products for agriculture, energy as well as environmental settings. DuPont is expecting to improve its capabilities as well as achieve means for both crop and seed protection for the ultimate goal of commercializing the biological solutions catering to agricultural customers globally.
The 15-year old research and development company is expected to bring in advancements in DuPont’s business of seed treatments, as well as foliar and soil applications for row crops, fruits and vegetables. Taxon has given few leads on which DuPont will start testing this year with new products expected to come in market within 5 years. DuPont is quite hopeful of expanding their business in Europe, North America and Latin America, as demand is higher in these regions.
The acquisition is one among several by DuPont to leverage through microbes, plant extracts and other natural substances for decreased use of pest control by improving plant health, quality and yield. In a parallel field, DuPont is already developing probiotics for human body, enzymes and proteins for industrial applications and animal feed, and inoculants for agriculture.
The market overview
DuPont's competitors are also closely working in the area. Rivals like Monsanto Co. (MON, Financial) has 500,000 test plots this year to experiment on microbial strains in the farms across the Midwest while Bayer AG (BAYRY, Financial), Syngenta (SYT, Financial) and few other companies are keen to bring out new biological products for plants.
The current market for biological products is worth $2 billion, which is expected to grow at the rate of 10% to 15% yearly.
Biological based products have been proved to be quite advantageous which not only increase the number of bushels on the farm but also improvise the next farming ambience. Through biological products, a major increase can be seen in farm produce of beans, wheat, canola, cotton along with other fruits and vegetables. Moreover, it’s also in keeping with the environmentalists and regulators at ease who have been raising concerns for the genetically developed crops and agricultural chemicals to modify the yield ultimately harming human health. There is also news coming in about methods under development to reduce use of insecticide or even reducing the usage of water or fertilizer.
Summing Up
DuPont in the past has been working towards innovating reformative agricultural products. It had recently launched DuPont Acapela soft controlling in France, which is a kind of biological treatment for plants to provide added value to the consumers. With a view to boost its market access in crop and seed protection, DuPont is all set to commercialize the biological solutions for agriculture market. Shares of DuPont gained 1.1% to $71.48 right after the announcement of the acquisition.
