China Agriculture Investment Bimonthly Report is the 7th newsletter that CCM launched two months ago, indicating that M&A in global agricultural industry is increasing.
In recent years, merger and acquisition (M&A) activities among global agricultural enterprises have increased year by year. In 2008, the world's largest oil producer Bunge acquired the world's largest corn processor, namely America Corn Products International, Inc., which was driven by the increasing global grain demand and the rising food price. Moreover, less profit has been gained from the industry and M&A will absolutely help Bunge to expand its business.
Many reasons are accountable for the increasing M&A activities in global agricultural enterprises. Nowadays, the competition in global agricultural industry becomes more intense, leading to the reduction of profit and the increase of risk. M&A will facilitate the enterprises to expand their market share and enhance their status in the global stage. For example, Sinochem corp.
purchased Makhteshim Agan Group with a bid to increase market share in May 2011.
According to CCM International's survey, the enterprises involved in the M&A share some common characteristics. First, some of them are shortage of raw materials. Second, they have solid financial strength and own rich experiences in the industry. Third, they conduct M&A with the purpose of expanding industrial chain.
For the target company in the M&A, advanced production technologies, rich administrative experience and capital will be introduced, helping boost technology level and R&D capability of the target company.
However, in the long run, it will to some extent threaten grain security of the target country. Take China which has vast land and huge population for example, its complex situation makes the Chinese Government has to be greatly aware of the grain security and know the market well. But on the whole, M&A is of great significance, making resource allocation more efficient, optimizing industry structure, and promoting development of global agricultural industry.
For more informationabout China Agriculture Investment Bimonthly Report, please feel free to contact us at econtact@cnchemicals.com
(Guangzhou China, September 25, 2011)
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