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China tightens grip on world seeds sector with $1.1bn Dow deal

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China's growth as a force in the global seeds industry took another step forward as the country's Citic Agri Fund paid $1.1bn for Brazilian assets sold by Dow Chemical to meet anti-trust concerns over its merger with DuPont.

Dow Chemical said that it had signed a "definitive agreement" to sell Citic Agri Fund Brazilian corn seed operations including processing plants, research centre, the Morgan seed brands and a copy of the US group's Brazilian germplasm bank for the grain.

The assets sold generated revenues of $257m last year, out of total Dow agriculture division sales of $6.17bn.

And it represents a further strengthening by China of its position in the world seeds market – a grip strengthened signally by Chemchina's $43bn purchase of Swiss-based Syngenta, the largest foreign takeover by a Chinese group.

At a smaller level, Origin Agritech revealed in December it had become the first Chinese biotech seed company to export genetically modified corn seeds to the US, for field tests taking place this summer.

'Core value'

The purchase by Citic Agri Fund comes a year after the fund - which is aimed at investing "in the core value of agriculture" - was established by the farm arm of Citic, the state-backed congolomerate, along with three listed Chinese agricultural companies.

These companies include Shenzhen-listed Longping High-Tech Agriculture, in which Citic Agriculture acquired a controlling stake early last year.

Shares in Longping High-Tech Agriculture, which also on Wednesday unveiled a 25.5m-yuan investment in a rice research institute in Nanjing, closed at 23.90 yuan, their highest finish in 18 months.

'Advances the approval process'

Andrew Liveris, the Dow Chemical chairman and chief executive, said that the asset disposal "advances the regulatory approval process" for its merger with DuPont, which will see the group's combined ag operations spun off as a separate company.

"The combination of our portfolios, even with this divestiture, will create a much stronger agriculture company with greater choice and innovation for growers around the world," Mr Liveris said.

Dow added that even factoring in the Brazilian asset sale, the merger with DuPont – which both groups were committed to closing next month - was on course to generate cost synergies of $3bn.

'High concentration'

The asset disposal was demanded by Brazilian antitrust regulator Cade as a condition of its approval for the Dow-DuPont tie-up.

Cade had warned that the merger "engenders a high concentration in the markets related to… crop protection products, mainly insecticides and herbicides used in several crops; and corn seeds, including the development of transgenic seeds".

By Mike Verdin

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