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Core competence back in vogue at AHP - Views on News from Equitymaster

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Core competence back in vogue at AHP

Mar 22, 2000

American Home Products (AHP) has announced the sale of its agro–chemical business to BASF AG. Thus AHP would now become a pure health–care company. AHP is represented in India by Wyeth Lederle (healthcare unit) and Cyanamid India (agro–chemicals). The agro–chemical scenario the world over has under gone a drastic change over the last year. The agri–business that comprises insecticides, fungicides, and herbicides has itself been restyled as the crop protection business. Genetic seeds, which would not need pesticides were being developed by agro–chemical companies.

Till last year pharmaceutical companies were considered the prime financers of this revolution. It was in this context that AHP had also tried an unsuccessful merger with Monsanto the agro–chemical major.

The wheel seems to have come a full circle. International pharmaceutical majors seem to have gone back to the core competence mantra. Novartis, which was formed with the merger of Ciba and Sandoz after the divestment of its chemical business (Clariant) demerged its agro–chemical operations and has recently proposed a merger of its agro–chemical business with Zeneca to form Syngenta. Hoechst Marion Roussel and Rhone Poulenc formed two separate companies Aventis Pharma and Aventis Crop Protection for their pharma and agro–chemical business respectively.

As far as the Indian operations are concerned the agri–business is concentrated on two crops rice and cotton. With agriculture itself showing marginal growth agro–chemical companies have been facing a tough time.

The current decision of AHP would lead to another round of re–alignment within the Indian agro–chemical sector. One does not know whether BASF, which has a 100% subsidiary and a listed company BASF Industries would give an open offer to the shareholders of Cyanamid or merge either of its subsidiaries with Cyanamid.


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