The CropScience unit of
) recently announced that it has inked a deal to buy the watermelon
and melon seed business of the US based privately-held seed
company, Abbott & Cobb Inc. The financial terms of the deal,
expected to close shortly, were not revealed. The transaction,
following its closure, should strengthen the vegetable seed
business at Bayer.
We note that Abbott & Cobb is a key player in the market for
watermelons in the US. Moreover, the company operates in Mexico,
Australia and Asia. Through this acquisition, Bayer aims to
strengthen its presence in the promising Asian market.
The move is consistent with Bayer's focus on emerging markets.
Sales in these markets improved by 9% on an adjusted basis to
€13,290 million in 2011. Emerging markets accounted for 36.4% of
total revenues in 2011. The comparable figure in 2010 was 35.6%.
Sales from emerging markets were encouraging in the first quarter
of 2012 as well, improving 6%.
With factors like pricing pressure and intensifying generic
competition affecting sales in large pharmaceutical markets,
companies are looking towards emerging markets to drive growth.
The CropScience segment is one of the world's leading
crop-science companies in the area of crop protection,
non-agricultural pest control, seeds, and plant
biotechnology. It develops and markets chemical crop
protection products (insecticides, herbicides, and fungicides),
seeds, and integrated plant biotechnology solutions for
agricultural and non-agricultural uses.
Even though impressed by the expansion efforts of Bayer, we
expect investor focus to remain on the performance of blood-thinner
Xarelto for the lucrative stroke prevention in nonvalvular atrial
fibrillation (SPAF) indication (approved late last year). Bayer's
efforts to expand the label of Xarelto into additional indications
are encouraging. The HealthCare unit of Bayer has co-developed
Xarelto with the Janssen Research and Development unit of
Johnson & Johnson
We currently have a Neutral recommendation on Bayer in the
long-run. The company carries a Zacks #3 Rank (Hold rating) in the
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