DuPont gains hard-fought majority stake in South Africa seed company

July 31 Wed Jul 31, 2013 7:59am EDT

July 31 (Reuters) - U.S. chemical and seed company DuPont said on Wednesday it completed its three-year effort to buy a majority stake in South Africa's largest seed company, overcoming that country's stiff opposition to the foreign ownership with pledges to keep a rein on pricing and to aid small South African farmers.

The deal with privately held Pannar Seed Ltd, a 55-year-old seed company, should provide immediate financial gain to DuPont, with new products expected to be on the market in August and September, according to Paul Schickler, president of DuPont Pioneer, DuPont's agricultural seed unit.

Both Pioneer and Pannar specialize in corn seed, or maize, and will focus on improving those product lines. But the companies will also explore opportunities for combining strengths in crops that include sorghum, soybeans, and wheat.

"This partnership, will result in more products, better products faster than the two companies could do individually," Schickler said in an interview.

DuPont now holds an 80 percent stake in Pannar. Other terms of the transaction were not disclosed.

DuPont sees Pannar's seed operations, which extend across nine African countries, helping broaden its infrastructure across the continent.

Africa has about 86 million acres (35 million hectares) available for maize production and seed demand is high, totaling about $350 million in annual sales of hybrid maize seeds in South Africa alone, according to DuPont officials. Currently, average grain yields on the continent are only about one-fifth of those in developed countries like the United States.

Pioneer officials say the South African market is a key growth opportunity as concerns mount about global food security and population growth. Pioneer, along with rival Monsanto Co., already saturate the United States with their specialized high-yielding corn and soybean crops and are pegging future growth to international expansion.

STIFF OPPOSITION

DuPont announced its intent to take a majority stake in Pannar in September 2010 and had hoped to complete the deal in early 2011. But opponents convinced regulators in South Africa to initially deny DuPont's bid.

The critics argued that allowing foreign corporate control of South Africa's seed supply would erode availability of traditional seed varieties, hurt export business with countries opposed to the biotech crops that DuPont develops, and force farmers deep into debt to pay for expensive seeds that are the patented properties of the U.S. corporations.

DuPont appealed the rejection by regulators and ultimately convinced South African officials to allow the transaction under certain conditions, including pledges by DuPont and Pannar to keep a lid on price increases for some new products for at least three sales seasons.

As well, Pioneer and Pannar pledged to keep in place for three years the maize hybrids currently marketed by Pannar, and to retain Pannar's current and replacement hybrid maize seeds and other maize varieties ordinarily sold to developing farmers. The companies also said they intend to maintain for five years Pannar's breeding programs in South Africa for sunflower, grain sorghum, forage sorghum, wheat, dry beans and soybeans.

Pioneer has also committed to investing 62 million South African Rand (more than $6 million USD) by 2017 to establish a technology hub in South Africa to bring advanced technologies to South Africa and Africa to speed and improve plant breeding.

Pioneer will spend about 20 million rand on educating and aiding small farmers to improve productivity, including the use hybrid seed, Schickler said. And the company is developing scholarship and fellowship opportunities for African plant breeders.

The commitments have not fully satisfied critics. Mariam Mayet, director of the African Centre for Biosafety, which opposed the Pioneer deal with Pannar, said Pioneer would be able to corner a greater share of the market and control prices for maize.

"Increased prices of maize seed will have a detrimental effect not only on farmer income but also on food security as we have already argued during the hearings," she told Reuters.

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