China's Citic Sees Brazil as Growth Driver After Corn Deal

December 12, 2017 04:31 PM
China's Citic Sees Brazil as Growth Driver After Corn Deal

(Bloomberg) -- Citic Agri Fund, an investment vehicle created by China’s largest conglomerate, has chosen Brazil as the platform for its global strategy in agriculture.

The Citic Ltd. fund concluded the acquisition of Dow Chemical’s Brazil corn-seed assets earlier this month in a $1.1 billion deal. Another $2.5 billion is available for new investments in research or acquisitions of other agricultural companies with profiles that match the fund’s strategy, including businesses in soybeans and rice, according to Vitor Cunha, the general manager at LP Sementes, the new company created from the corn deal.

"Citic is starting to become an international company, and Brazil will be the global manager of this strategy," Cunha said in a telephone interview from Ribeirao Preto, in Sao Paulo state. "The Chinese will expand its agricultural business from Brazil."

The decision to make Brazil the main driver for Citic’s global agriculture growth stems from the Dow corn deal. The acquired assets give Citic deeper knowledge about the corn-seed market, Cunha said. LP Sementes is Brazil’s third-biggest supplier of the seeds, with almost 20 percent market share. Yuan Longping High-tech Agriculture, the company responsible for managing Citic’s corn assets in Brazil, is the world’s largest rice-seed company.

LP Sementes plans to offer a new corn-seed brand to replace a Dow variety by April 2018 for planting during the 2018-19 season. The company has the right to use the Dow brand over the next 12 months. The newly formed company’s sales strategy and its focus on co-operatives and retailers will remain unchanged, Cunha said.

"We are committed to grow faster than Brazil’s corn-seed market, where sales have increased between 3 and 5 percent over the past years, driven by the winter corn planting expansion," he said.

While no substantial change in the company’s management is expected after the acquisition, Cunha, who was also general manager at the former Dow unit, said LP Sementes plans to try and expand its seeds genetics to others countries in South America and in Africa.

"China is trying to expand partnerships with this deal in Brazil -- we don’t see it as a threat or loss of sovereignty to Brazil,” Cunha said after being asked about a tweet on Citic-Dow deal sent Dec. 10 by Jair Bolsonaro, one of the leading candidates in the nation’s presidential elections. Bolsonaro argued the deal poses a threat to Brazil’s food security as it gives China almost 20 percent of the country’s corn-seed market.

It’s possible Bolsonaro hasn’t “correctly assessed” the deal, Cunha said. “If you’re going to export genetics to Africa or Asia, a Brazilian company will get the royalties."

Dow sold its corn seeds assets in Brazil to address antitrust concerns ahead of its merger with DuPont Co.


©2017 Bloomberg L.P.

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