Ag Retail Consolidation: Going Nowhere But Up

My partner in crime shared some of the early returns from our 29th CropLife 100 research project, and so far there haven’t been any wild surprises. But one that has piqued my attention is the last one Eric Sfiligoj mentions: Consolidation.

We’ve seen some interesting moves this year to be sure, and each with a pretty robust price tag. This past summer, Monsanto stunned almost everyone with its $250 million dollar purchase of Precision Planting. This planting technology will soon be the equipment growers will be required use to carry out the plant population and depth recommendations Monsanto will be dispensing via its FieldScripts program.

In September, BASF turned rumor into reality when it announced the purchase of Becker Underwood for the hefty price of $1 billion. The deal is expected to close by year’s end.

Closer to “home” for retailers was the announcement in September that Pinnacle Agriculture holdings had acquired a controlling share of southern retailer Jimmy Sanders Inc., Cleveland, MS, the largest regional retail player in the Mid-South. Sanders had been on the block for some time, and this deal had been in the rumor mill this summer.

Pinnacle Agriculture, as some of you are probably personally aware, has been aggressively pursuing a U.S. retail presence, led by long-time retail executive Kenneth Cordell. His efforts are being funded by Apollo Global Management LLC, the same outfit that built up and then sold United Agri Products to Agrium in late 2007. No doubt this won’t be the last we hear from Pinnacle before CropLife’s December issue hits the mail.

What has been particularly astounding has been the purchase price for some of these entities, which at the time I would have characterized as “top dollar” for what I, and others I’ve talked to, would have estimated. Our free enterprise system has always taught us that to succeed you need to “buy low.” Looking at the cost of acquisition right now and the timing of the purchases, you’re left with one conclusion: the only place for market value to go in agriculture is up.

Not that investors in other markets haven’t made the mistake before of investing at a high level right before a crash. We’re still trying to climb out of that scenario in the housing market and elsewhere in our beleaguered economy. But it’s clear that the folks with cash to spend are saying that they don’t expect this run to end anytime soon.

Beyond the big guns of Apollo, there are plenty of rumors out there about possible acquisitions and mergers among retailers big and small. For folks on the brink of retirement or transition, these are times for making difficult decisions. Should I hang on or hang it up? Pass it on or cash in? It feels like 2013 could be a watershed year.

As the only media group exclusively serving the ag distribution channel, you can rely on CropLife magazine and our Website for information and ideas related to the issues most affecting you and your business, including consolidation. Specifically, look for a new series of articles on the future of retailing beginning this January. We look forward to being your information partner for years to come.

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