Agrevo, RP Agro set to merge - Views on News from Equitymaster

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Agrevo, RP Agro set to merge

Mar 11, 2000

Agrevo, the former agro–division of Hoechst Marion Roussel (HMR) in India and Rhone Poulenc Agro the agro–division of Rhone Poulenc in India are set to merge as Aventis Crop Science. Though the legal merger is still some time away the manufacturing and the marketing operations of the two companies are to integrated. Agrevo is one of India’s top five agro–chemical companies. It is a leader in the cotton crop protection business (cotton is the biggest crop). It has launched new herbicides as well as fungicides to broaden its product portfolio. Agrevo's return on equity at over 30% is the highest in the agro–chemical sector.

What will be the most interesting part is the fact as to how the company handles the integration field forces of the two companies. This is because both the companies have so far concentrated on the states of Maharashtra, Gujarat and Andhra Pradesh. Hence, one foresees a restructuring of the field force despite the company’s announcements to the contrary.

The second part is the fact that both the companies have a major portion of their revenues from insecticides rather than from herbicides or fungicides. This is because of the structure of the market. Hence the merger would also involve the structuring of the products between the two companies.

All in all, the merger would be a positve for the pharmaceutical business of the Rhone Poulenc. This business gives higher returns than its agro–chemical business and it would further improve the valuations for Rhone Poulenc once the legal merger between Agrevo and Rhone Poulenc Agro is put in place.

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