Spotlight Interview: Dr. Gerhard Prante, Advisory Board Member ...

Spotlight Interview: Dr. Gerhard Prante, Advisory
Board Member, Lincoln International
Dr. Gerhard Prante
joined the advisory
board of Lincoln International
Germany in
2003. Dr. Prante was
previously CEO of
AgrEvo, a Joint Venture
between Hoechst
and Schering, and
Deputy CEO of
Aventis CropScience, which was formed
through the merger of AgrEvo and Rhône-
Poulenc Agro. During his time at Aventis
CropScience he was responsible for the
sale of the company to Bayer AG for a consideration
of Euro 6.9bn. Today, Bayer
CropScience generates revenues of Euro
5.9bn and realizes an EBITDA-margin of
22%.
What do you think are the overweighing
trends in the Agrochem and Crop-
Science industry?
The global market for chemical crop protection
products is today the most significant
part of the crop science market with a total
value of approximately $50 billion. Over the
last ten years, biotechnology has been the
catalyst for the development of this market.
New traits in crops such as soybean, corn,
cotton and oil seed rape/canola, have had
a significant influence on the chemical crop
protection market. Glyphosate for example,
can be used today as a selective herbicide
in soybeans due to the genetically induced
tolerance. The herbicide tolerance trait is
also available in cotton, corn and canola. In
the first two a genetically induced insect
resistance trait is available in biotech varieties
as well.
What consequences do you see deriving
from these trends?
These biotech crops have already and will
continue to have an influence on the herbicides
used by the farmers, which will hence
lead to a change of portfolio in the herbicide
market. The insect resistance in cotton and
corn partly substitutes the use of chemical
insecticides. In 2005, biotech crops were
“The biotech crops and in particular
the crop protection input traits will
continue to grow at a rate of 8% to
10% p.a. over the next ten years.”
planted on approx. 90 million hectares
globally. The result of the acreage growth
of the biotech crops during the last 10
years has been more or less stagnating
chemical crop protection consumption. The
biotech crops and in particular the crop
protection input traits will continue to grow
at a rate of 8% to 10% p.a. over the next
ten years. For those market participants
with a primary focus on the chemical crop
protection portfolio, R&D and cost efficiency
will be decisive for their competitive
position and growth potential. Generic companies
on the other hand will potentially
enjoy more growth in the future because a
number of products that recently came off
patent have very high technology standards,
which cannot easily be surpassed
by new molecules with the same economical
value for the customers.
Monsanto just recently announced earnings
of $334 million for Q3/06 compared
to $47 million for the same period of last
fiscal year. Were you surprised by this
significant increase in earnings?
No, this did not come as a big surprise to
me. The reason is that Monsanto undertook
major acquisitions in 2004 and 2005,
e.g. the global market leader in vegetable
seeds, Seminis, Inc. Moreover, Monsanto
is the unrivalled market leader in biotech
crops. Biotech crops offer two income
streams, one based on the traits and the
second based on the performance of the
genetics. Monsanto is now harvesting the
result of some twenty years of consequent
investment in biotech and genetics. As
mentioned earlier, biotechnology is the
catalyst in forming the plant science industry.
This industry has three innovation platforms,
namely chemistry, biotechnology
and plant genetics. The driver for innovation
in this industry today is plant genetics,
which employs the results of biotechnology
in its breeding process.
What needs do you see for plant science
companies in terms of external
growth opportunities?
The reality of today is the existence of an
approx. $50 billion crop science market.
Hence the R&D-based companies will only
have the chance to participate in the growth
driven by the crop protection input traits
and the genetics if they have the assets
and the abilities to use all three innovation
platforms for new innovative products for
the farming industry. On the other hand,
those companies with a focus on chemical
crop protection products can only generate
growth if they have a very strong R&D pipeline
and at the same time are very cost
efficient. As a result we can expect further
consolidation among R&D-based companies
and further acquisition activities of the
generic companies. Likewise, further consolidation
in the biotech as well as the seed
industry will occur. One recent example is
the acquisition of CropDesign by BASF and
the seed acquisitions of Syngenta and
Monsanto during the past 24 months.
Dr. Prante, you joined Lincoln International’s
Advisory Board in Germany in
2003. What makes this activity interesting
for you?
I spent all my professional life in the chemicals
and agricultural industry, including crop
protection, animal health, biotech and
seeds. During my time as CEO of AgrEvo
and deputy CEO of Aventis CropScience, I
worked together with investment banks in a
number of M&A-Transactions. Thus, I believe
I have a good understanding for what
clients expect from their advisors. I always
had a preference for those advisors who
have a solid understanding of my industry
based on practical experience. The prospect
of working with a dynamic team of
excellent M&A bankers at Lincoln International,
combining senior operational experience
and industry knowledge with outstanding
transaction know-how, is an exceptionally
attractive one.
4 Lincoln International DEALREADER Chemicals Q2 2006