The year ahead could prove to be game–changing in the non-crop part of the agrochemicals industry, as Bayer has announced plans to divest its Environmental Science division. The division currently generates sales of approximately EUR 600 million (USD 717 million) in 2019. The divestment includes leading solutions across five main segments:
- Vector control: mosquito control
- Professional pest management: professional home & industrial pest control
- Industrial vegetation management: weed control in non-ag environment
- Forestry weed & pest control in professional timber & forestry
- Turf and ornamentals: weed & pest control in professional turfed landscape & greenhouses
Kline has developed longstanding expertise across these non-crop segments, leading to a detailed understanding of each of the five business units within Bayer Environmental Sciences: The Vector Control division mostly includes mosquito control to limit the spread of disease. This market is mainly driven by government public health agencies and non–profit charities involved in malaria aid. Bayer has established itself globally as a source of solutions in both adulticide and larvicide control for mosquitoes. In Kline’s Mosquito Control: Market Analysis and Opportunities reports, Bayer is ranked as the number one global supplier, accounting for over 10% of industry sales, notably with its renowned K-Othrine brand targeting adult mosquitoes. In 2020, the company introduced a new brand, Fludora Co-Max, in Côte d’Ivoire, with intentions to release it in Sub–Saharan Africa, Asia-Pacific, and Latin America in 2021/2022. It contains two active ingredients new to mosquito control to provide better control against pesticide–resistant mosquitoes.
According to Professional Pest Management Market for Pesticides study, Bayer holds the highest number of branded insecticides. Some of Bayer’s leading brands include:
- Premise, a top–selling anti–termite treatment
- Maxforce, a prominent cockroach treatment
- Racumin, a leading brand in the rodenticide market
Kline’s Industrial Vegetation Management Market for Pesticides report, which includes forestry activities, indicates that this is also a significant segment for Bayer. Our research shows Bayer almost doubled sales in the segment in 2019, primarily due to its merger with Monsanto and partial acquisition of DuPont’s IVM product line. The Monsanto merger introduced glyphosate active ingredients into Bayer’s portfolio through the Roundup brand. While Roundup remains contentious, it still dominates global sales as the leading solution for non-selective and pre– and post–emergence herbicide usage.
Kline’s research on Professional Turf and Ornamental: Markets for Pesticides and Fertilizers reports that in 2020, Bayer had over 100 different products across all regions served. This includes new biopesticide products such as Serenade biofungicide used in ornamentals. Our research on Bayer’s product portfolio suggests growth of close to 4% CAGR in the next five years in select countries.
Much like dandelions, an unpopular flower, Roundup has become a pleasure and pain for Bayer. Increased sales have led to the firm’s dominance in many key market segments. The controversial product was embroiled in litigation cases, and it remains unclear whether the brand will be part of the upcoming divestment. A diverse portfolio with a dominant market share in all segments could encourage the acquirer to rationalize the portfolio affecting product availability for end users. Rationalization could be encouraged for portfolio efficiency or if important ingredients supplies are constrained in the long term. Kline’s M&A consultants continue to actively follow this business and markets served alongside our long-serving experts. We observed significant industry consolidation taking place over the last two to three years alone through players like Monsanto, FMC, and Sumitomo.
Each of the Environmental Sciences business lines has different drivers and strong brand positions. Yet in some cases, the portfolio could be considered mature with the need for new product development and sourcing new actives. As outlined, there are several areas to focus commercial and technical due diligence efforts on while considering more growth and value creation opportunities for this exciting, upcoming carveout. Our consultants have identified the value this asset could generate for strategics and sponsors.