Marrone Bio Spurns Takeover Offers in Bet on Bio Pesticides Boom
Marrone Bio Innovations Inc. (MBII), a maker of biological weed- and pest-killers that sold shares in an initial public offering this year, spurned takeover approaches in a bet that it can grow faster independently in its booming niche market.
The market for biological-crop sprays is growing three times faster than the market for chemical pesticides, chief executive officer and founder Pam Marrone said in an interview. She declined to comment on which companies approached Davis, California-based Marrone Bio, in which the world’s largest pesticide-maker Syngenta AG (SYNN) owns 13 percent.
Pesticide-makers such as Switzerland’s Syngenta as well as Bayer AG and BASF SE of Germany are seeking environmentally friendly technology as the European Union phases out hundreds of agrochemical products and supermarkets require fewer chemical residues on foods. Syngenta has said it could lose $75 million in sales from a two-year EU ban on its Thiamethoxam chemical amid concerns to bee health. The EU ban will take effect Dec. 1.
“We have a significant headstart,” said Marrone, a former excecutive of the world’s largest seed company Monsanto Co., where she led the company’s insect-control division from 1983 to 1990. “The big guys are 10 years away -- they are getting into it through acquisitions and in licensing.”
Marrone Bio turned down suitors following a “buying frenzy” last year, which included Bayer’s purchase of AgraQuest, Syngenta’s acquisition of Belgian hybrid-rice seed maker DevGen and BASF’s purchase of Becker Underwood Inc., she said.
“We sorted through the incoming interest -- and when we saw where it was going to go we said we would go really fast to IPO because there was a window opening,” the CEO said.
Since the August share sale, which raised $56 million, Marrone Bio shares have risen about 50 percent, valuing the company at $345 million.
Syngenta, which has a market valuation of 34 billion francs ($38 billion), is the company’s largest shareholder through it’s venture capital unit. Dutch chemical company Royal DSM NV, Japan’s Mitsui Chemicals Inc. and the world’s largest asset manager, BlackRock Inc. (BLK), are also investors.
The company’s growth and successful share sale is a validation for Marrone after she missed out on an IPO in 2001 for AgraQuest, another biological pest management solutions company she founded in 1995. Marrone was later ousted as CEO, and Chemtura Corp. executive Marcus Meadows-Smith was chosen by investors to replace her. Bayer bought the company for $425 million in 2012.
Marrone Bio’s biological herbicides and insecticides are also in demand as they can help to mitigate the effects of resistance to existing crop chemicals and can be brought to market more quickly, said Vice President Jim Lappin, who joined last month from the agricultural division of chemical research company FMC Corp. (FMC)
The company is sticking to a plan to become profitable in 2015, with about $250 million in sales two years later, the CEO said. The company is on track to double sales this year from the $7 million achieved in 2012, senior vice president Hector Absi said in the same interview.
As much as $40 million of the IPO proceeds will be used to build a fermentation facility in Bangor, Michigan for manufacturing bio pesticides, Marrone said at the International Biocontrol Manufacturers Association meeting in Basel. The company has no plans to sell more shares, except to fund acquisitions, she said.
Lappin said the focus on environmentally friendly offerings cuts costs and speeds up regulatory approval.
Large agrochemical companies are producing increasingly fewer active chemical ingredients, which can cost $250 million to develop over a period of about nine years, he said. Marrone Bio’s Regalia, Grandevo and Zequanox offerings moved through development, approval by the Environmental Protection Agency and U.S. market launch in about four years at a cost of $6 million each, according to a Marrone Bio SEC filing.
While bioinsecticide Grandevo offers protection against a wide range of insects and mites, Regalia is a biofungicide to improve root development and plant growth. Zequanox is an aquatic pesticide, composed of dead cells of a naturally occurring microbe.
Asked whether she might be tempted to sell the company at a later stage, Marrone said that she wants to grow the company independently.
“If it was up to me, I would stay independent,” she said. “I think we can grow faster and innovate more. Our goal is to be the largest independent biopesticide company.”
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