Published: 14 October 2013

Seed Co Limited is mulling shedding its cotton planting seed company, Quton, seven years after it acquired the business from Cottco, and Indian firm Mahyco has emerged as a front runner to swoop on the company.

Market watchers say Seed Co has put a $38 million price tag on the company.

Sources familiar with the transaction said representatives of Mahyco, which is being represented by Ernst and Young India, are set to jet into the country this week as negotiations continue.

"Seed Co is mulling selling 100 percent of its subsidiary. It has put a price tag of $38 million but Mahyco has offered $20 million, which is now a sticking point, with issues of indigenisation also coming into play.

"Mahyco is sending its representative who is from Ernst and Young India and we are expecting him this week," said a senior Seed Co-executive, who refused to be named because of the sensitivity of the matter.

Seed Co group chief executive Mr Morgan Nzwere was reluctant to give details of the deal, electing instead to note that it was only one of the options that were being considered by the company.

"It's a wild thought, it's still a far-fetched concept that we have looked at. We don't have any written document to that effect, so, for now, we don't have a concrete position," explained Mr Nzwere.

The deal comes after Seed Co announced last week that it had sold a 25 percent stake to New York Stock Exchange-listed seed firm Vilmorin and Cie SA in a technical and equity partnership deal.

Mahyco was founded in 1964 and today it has more than 15 production centres, 23 sales offices and about 2 500 dealers located across India.

The company is actively involved in the research, development, production, processing and marketing of 115 products in 30 crop species, including cereals, oilseeds, fibre crops and vegetables.

It has to its credit 21 notified research varieties.

The company's technology is referred to as a global benchmark and is respected worldwide as a pioneer of high quality hybrid and or open-pollinated seeds and for its strict adherence to quality.

Over the years, Mahyco has entered into collaborations with academia and industry to keep abreast with new developments across the agri-business spectrum.

Its association with American chemical and agricultural biotechnology corporation Monsato, using the Bt technology for cotton in1998, is one such example.

Bt cotton, which is a genetically modified variety of cotton that can produce an insecticide, is commercially grown in several countries such as China, Australia, Mexico, South Africa, Argentina, India and Indonesia.

Quton is considered the only cotton planting seed company in Zimbabwe and its main role is breeding, processing and marketing cotton seed to largely smallholder sectors in the Sadc region.

The firm has made headway in incorporating genetically modified herbicide tolerant and pest resistant varieties and has been awarded a seven-year exclusive multiplication agreement in Tanzania.

However, Seedco is currently actively seeking fresh finance to reduce debts in Zimbabwe, which saw its interest burden soar to $7 million by March 31, 2013.

As part of its expansion plan, Seed Co also intends to acquired a $6 million farm in Zambia.

About $6 million is being sought for the construction of a factory, warehouse and offices in Malawi where it is renting premises at a princely $400 000 per year.

In addition, Seed Co requires $8 million for equipping operations in Ethiopia and West Africa since the company believes that it would not be viable to export to these markets.

Failure to implement the transaction will compromise the company's ability to sustain its dominant position in the African seed business, limit its research and development capabilities, a development that will hinder growth. Seed Co reported that revenues recorded in the year to March 31, 2013, climbed to $110,6 million, while after-tax profit rose to $12,6 million.
- sunday mail

You might also want to read this

• Quton releases new cotton hybrid seed