China丨Grand Holding acquired Microbe with ¥ 830 million to lay out for biopesticide industry chain

On Nov 2, Grand holding announced that its wholly-owned subsidiary plans to acquire a 100% stake of Microbe with ¥100 million

Grand holding plans to take full control of Microbe

Recently, there was a big acquisition in China agricultural sector. Grand holding announced that Grand life sciences plans to acquire the total 100% equity of Microbe held by Weng and other transferors at the price of ¥830 million. The actual payment consideration of the transferors is not more than ¥780 million, and the remaining about ¥50 million will be paid to Microbe to enhance its operation capacity.

The board of directors held a meeting on the same day, and approved the takeover proposal. Meanwhile, Grand life sciences has signed an equity transfer agreement with the transferors. Grand holding expressed that the acquisition agreement will become effective after the shareholders' meeting to review and approve the deal.

Actually, this acquisition began last year. On Oct 29, 2021 Grand holding announced that Grand life sciences signed a framework agreement with Weng and Microbe to acquire 98.7% of Microbe's equity.

At that time, the parties agreed that the overall equity of Micorbe was estimated between ¥600 million and ¥700 million in accordance with the 2021 net profit. Weng is the legal representative of Microbe, the actual controller. In addition to the 98.7% of the equity controlled by Weng, the remaining 1.3% equity is controlled by other four shareholders.

The finalized offer involves a full equity stake, which will be wholly controlled by Grand Holding.

Microbe has seen equity transfers three times and a net profit margin of more than 30%

Founded in 2013, Microbe, which is located in the high-tech zone of Pucheng county, Weinan city, Shannxi province, is mainly engaged in the R&D, production and sales of bio-pesticide technicals. It is one of the first nine selected Little Giant enterprises in Shaanxi Province. It will be the largest acquisition in China biopesticide sector in recent years.

Actually, in the nearly 10 years, Microbe has experienced three times equity transfers, and the equity structure has undergone great changes.

According to the income method assessment, the total equity of shareholders of Microbe is worth ¥831 million, which is ¥630 million higher than the book net asset of ¥201 million, and the value-added rate is 312.94%. This represents a premium of more than three times.

As for Microbe’s operation, it shows good strength. It is understood that Microbe has 53 pesticide registrations. and its products are exported to more than 30 countries and regions such as Japan, South Korea, Vietnam, Pakistan and Peru.

As for its performance, Microbe achieved revenue and net profit of ¥163 million and ¥49.2445 million in 2021; In the first half of 2022, the revenue and net profit were 96.991,200 yuan and 33.8685 yuan respectively.

According to this calculation, Microbe's net profit margin for the whole of last year and the first half of this year was more than 30%.

As of June 30 this year, Microbe had total assets of ¥337 million, total liabilities of ¥142 million, net assets and receivables of ¥195 million and 15.086,500 yuan respectively.

Grand Holding seeks to lay out for the industrial chain of bio-pesticides

Registered in Lianyungang, Jiangsu Province, Grand Holding, formerly known as Ruyi Group, is a listed company focused on commodity trading.

As a listed company mainly doing bulk trade, why choose the R&D enterprise of pesticide technical?

Grand holding said that Microbe is a national high-tech enterprise specializing in large-scale production of bio-pesticide technicals. Its product portfolio is based on Kasugamycin technicals, including Kasugamycin, Polyoxin, Pyrimidine nucleoside antibiotic technicals, single and compound formulations.

Among them, Kasugamycin technical's production capacity and output rank first in China. It is one of the leading enterprises in the domestic bio-pesticide industry. The acquisition will help to enrich Grand Holding’s product layout in the field of bio-agriculture.

Biopesticide industry is one of rapid growth industry. According to the International Center for Applied Biological Sciences, the global bio-pesticide market grew at a compound rate of 15.2% from 2009 to 2020, much higher than the 4.4% growth rate of the pesticide industry during the same period.

Bio-pesticides have become more widely used in recent years, mainly because of the growing demand for organic food, according to a securities analyst. The domestic market supply and demand of bio-pesticide is not balanced, and the coverage rate is limited, so there is a large room for growth.

Broad Holdings is seeking to establish a presence in this area, so as to realize the transition to the integration of trade and production.

In May 2021, Grand Holding acquired KLBIOS, another bio-pesticide technical and formulation company. Grand Holding said it will focus on developing the fungicides and plant growth regulators market in the short term, relying on Microbe, KLBIOS and other bio-agriculture units. In the future, we will strive to become a leading enterprise in bio-agriculture in China.