Origin Agritech Ltd. (NASDAQ:SEED) investors cheer the news that the seed maker has entered into a definitive agreement to sell its proprietary China-based commercial corn seed production and distribution business for RMB 400 million (approximately USD $60 million) to Beijing Shihui Agricultural Development Co, Ltd.
Origin Agritech shares reacted to the news, rising nearly 20% to $2.82 in early trading Wednesday.
This is the next phase in management’s plan to establish Origin as a global seed germplasm and biotech trait leader. Origin will retain its corn breeding and biotech research and development capabilities, which include modern laboratories, extensive field testing networks and off-season winter nursery in Hainan, to expand and pursue germplasm and trait licensing opportunities. Through Xinjiang Originbo, Origin also will maintain its “Green Pass” status, allowing it the competitive advantage of introducing new hybrid varieties to the Chinese market through an expedited government approval process.
This transaction is subject to customary closing conditions and shareholder approval. It is expected to close in the first quarter of 2017.
Following a strategic review by the special committee of the board of directors, it was determined that the sale of Origin’s proprietary commercial seed business would strengthen its balance sheet and enable it to focus on biotechnology trait and seed germplasm research and development.
“The sale and repositioning of Origin’s commercial seed business represents a significant step in evolving the company’s strategic direction and positions Origin for a stronger future,” said Bill Niebur, Origin CEO. “This transition will allow us to emphasize biotechnology and strategic partnerships both within China and around the globe. We believe the sale of these assets to Beijing Shihui realizes the value of our commercial seed business. We will utilize the proceeds to accelerate the licensing of our biotech traits and seed germplasm to other seed companies in China. We will also develop our non-genetically modified corn and soybean business in the United States, making what we believe will be a stronger and more attractive business in the years to come.”
Under the terms of this deal, the acquirer of the China-based commercial seed business will enter into separate license agreements to pay Origin a royalty stream for the present and future product portfolio and a technology access fee for the research and development effort that Origin provides going forward in the areas of product discovery and development, hybrid registration, trait integration and intellectual property protection.
The transaction includes all or substantial equity interests in Linze Origin Seed Limited, Changchun Origin Seed Technology Development Limited and DenongZhengcheng Seed Limited, the Linze branch and Zhengzhou branch of Beijing Origin Seed Limited, and certain real estate owned by Beijing Origin Seed Limited.
“Through this transaction and the development of our North American non-GM business, we believe that we are setting the stage for compelling growth opportunities,” Niebur said. “We have a very exciting future ahead of us and look forward to providing our investors with additional updates on our business in the upcoming weeks and months.” (Original Source)
Origin Agritech Ltd. engages in the research and development, production, and sale and distribution of hybrid agricultural crop seeds. It operates in the Biotech and Product Development and Seed Production and Distribution segments. The company was founded by Gengchen Han in 1997 and is headquartered in Beijing, China.