Spring 2017

Spring 20171

In our inaugural Specialty Crop Inputs report, we’ve focused on companies participating in three main areas: 1) Biologicals, 2) Specialty crop nutrition and 3) Spray-assist products (see sidebar for descriptions). We will outline some of the mergers, acquisitions and investment activities that have taken place over the last few years and some of the underlying drivers and trends.

We broadly define Specialty Crop Inputs as crop protectants and stimulants generally used in niche markets, or in special situations on major crops that also often have some unique technology that differentiates them in the marketplace. These products generally exclude the commodity N, P, K fertilizers, seed, the big market crop protection products and their generic competitors, which are dominated by the global ag input companies.

Specialty Crop Inputs include 1) Soil and plant-applied biologicals and biologically derived products such as microbials, biofertilizers, plant and microbial extracts/metabolites, biostimulants (humic/fulvic acids, seaweed extracts etc.) and biopesticides, 2) Specialty crop nutrition such as water soluble fertilizers, controlled/slow-release fertilizers, certain starter and micronutrient-based fertilizers and fertilizer use enhancement products, additives and stabilizers such as urease inhibitors, etc. and 3) Spray-assist products such as adjuvants, water conditioners, compatibility agents, pH modifiers, wetting agents, spreader/ stickers, drift retardants, deposition aids and surfactants.

The application of Specialty Crop Inputs can be 1) via coating of seed or fertilizer granules, 2) tank mixed with conventional crop nutrition and/or crop protection products and foliar or soil applied or 3) custom formulated and applied directly to the crop or soil.

Spring 20172

The biologicals space within the Specialty Crop Inputs industry has seen strong interest from the major crop input companies and private equity (PE) over the last few years. From our viewpoint, the interest was driven initially by a confluence of factors such as high crop prices (mid 2000s), sound science, demand for environmentally friendly products, stagnation of new crop protection active ingredients, increasing issues with pest resistance, the search for alternate and complimentary product lines and successful results in the field. Traditionally, row crop producers stuck to the tried, true and tested (with notable exceptions such as rhizobial inoculants), and they viewed anything outside of conventional inputs with a high degree of skepticism. Only producers of high-value, specialty crops would consider experimenting with “out-of-the-box” inputs.

While the high commodity crop prices in the mid 2000s certainly contributed to conventional producers’ “openness” to try new products by attempting to push yields to their genetic limits, the entry of large companies such as BASF, Bayer and Monsanto into the biologicals market created much needed credibility.

In 2012, BASF acquired Becker Underwood from Norwest Equity Partners for approximately $1.1B. For years, BASF had been conducting extensive research on plant health and alternate ways to mitigate abiotic stress in major crop plants. The Becker Underwood acquisition provided a robust platform of well-established products in global markets, plus a pipeline of new technologies that BASF could roll out through its substantial sales channels. Meanwhile, Bayer’s acquisition of Agraquest bolstered its R&D program for biocontrol products and provided products and technologies in late-stage development and early commercialization that could be rolled out through its sales channels. Finally, Monsanto sought to partner with Novozymes, through the newly formed BioAg Alliance, to co-develop new commercial microbial products.

Large fertilizer companies such as Koch also have been active (through its Koch Agronomic Services subsidiary). It recently announced an investment in biologicals developer Pathway Biologicals and in 2014 it acquired the biological research and development business of Mendel Biotechnology, Inc. Agrium’s entry into the biologicals market was largely via its business unit Loveland’s initial and subsequent investments in Agricen.

Spring 20173

M&A activity in the specialty crop nutrition space also has been robust but with much less fanfare, and with limited participation by the major crop protection companies. Koch’s entry in the biologicals market, as outlined above, was designed to compliment its acquisition of the Agrium Advanced Solutions, Turf and Ornamental Specialty slow-release products business and its earlier acquisitions of two nitrogen stabilizing businesses, Agrotain and Nitramin. Brandt Consolidated recently acquired Baicor to strengthen its product pipeline and acquired Grigg Bros to strengthen its position in the turf market.

The PE community also recognized the opportunities in specialty crop nutrition. Norwest Equity Partners acquired Actagro in early 2012, a specialty crop nutrition business with its underlying Organic Acids® Technology PlatformTM

and in 2012, Paine Schwartz Partners (formerly Paine and Partners) formed Verdesian Life Sciences. The two PE firms have taken radically different approaches to growing their respective platform businesses. Actagro has focused almost entirely on building out new technology and establishing wider and deeper distribution in attractive markets around the world, while Verdesian has built its product line and distribution relationships largely through numerous acquisitions. Since its formation, Verdesian has acquired BioGro Western (phosphites), Northwest Agricultural Products (wide range of products including biostimulants & biopesticides), INTX Microbials (biological inoculants), Specialty Fertilizers Products (fertilizer use enhancement) and QC Corporation (micronutrients). More recent entrants in the space include Dunes Point Capital via its acquisition of the parent company of Miller Chemical and Fertilizer.

While there may be fewer transactions that are driven principally by opportunities in spray-assist products, several of the acquired companies described above had a portfolio of well-researched, efficacious products that likely helped enhance deal value. Often, these products can help the acquiring company generate nice margins and provide some additional consistency to cash flow, particularly if they continue to operate as stand-alone businesses.

Spring 20174

The robust M&A activity over recent years in the biologicals and specialty crop nutrition space leaves some interesting growth challenges for many mid-tier and smaller market participants. While many have tried direct sales, such efforts often result in limited success due the technical nature of the sale process and the resources required.

Typically, businesses start out with a single, or at most a few, proprietary products that are developed or formulated to address a specific need. Some evolve from there into multi-product regional businesses, while others tend to stick to the narrow offering and market broadly.

Either way, breaking into the highly concentrated agri-retail networks in North America is a huge challenge. Many distribution networks (CPS, Helena, Simplot, Winfield United, Pinnacle, etc.) also have backward integrated into the specialty crop input space as a means to add customer value and margins while differentiating themselves from their competitors. Often their own specialty products receive strategic priority by sales reps and locations. As such, often it is difficult to penetrate the major channels with anything more than a single highly unique and proprietary product or product line that can’t be accessed elsewhere and that has no good substitutes.

Growing globally has its own host of challenges. Using regional or country level distribution partners requires deep technical support on the ground as many products need to be properly positioned in order to effective.

Inconsistent performance often can be traced back to inappropriate use. Also, depending on the country and the type of product, getting regulatory approval can be a challenge, especially for the smaller market participants.

Regardless of the challenges in attaining breakthrough results, many of the smaller specialty crop input businesses we have reviewed are performing very well, with strong margins, solid growth and prospects, and subsequently should attract strong multiples should they decide to pursue a sale. Interest from both strategic and financial buyers continues to be strong.

Spring 20175

Source(s): FactSet

Stock Price Performance Capitalization ($mm) '15E-'17E CAGR '16E Margin Valuation

Price ($) % of 52 % Change Market Enterprise EBITDA EV/Revenue EV/EBITDA EV/EBITDA - Capex

Company 3/20/17 Week High 1 Year Cap Value Margin 2016E 2017E 2016E 2017E 2016E 2017E

Marrone Bio Innovations, Inc. $1.95 70% 77% 47 90 56% (33%) (3%) 6.2x 3.7x (191.5x) (5.5x) (53.8x) (4.4x)

Plant Impact Plc $0.67 111% (18%) 55 47 46% 96% (1%) 5.3x 3.3x (382.1x) (95.4x) (25.5x) (20.1x)

AgroFresh Solutions, Inc. $3.39 49% (44%) 172 503 NA NA 49% 3.1x NA 6.5x NA NA NA

FMC Corp. $61.36 98% 50% 8,203 10,089 2% 11% 22% 3.1x 3.0x 14.2x 13.0x 17.5x 16.1x

Bagfas Bandirma Gübre Fabrikalari AS $2.84 17% (44%) 128 231 (5%) (5%) 14% 1.9x 1.6x 13.4x 11.7x NA NA

American Vanguard Corp. $15.75 79% (2%) 463 496 7% 26% 13% 1.6x 1.5x 12.2x 9.7x 16.5x 11.2x

Gübre Fabrikalari TAS $1.26 20% (39%) 421 658 (6%) (4%) 9% 0.7x 0.7x 7.7x 5.8x 10.9x 7.4x

The Andersons, Inc. $38.75 86% 27% 1,093 1,489 (1%) 15% 3% 0.4x 0.4x 12.8x 7.8x 71.6x 12.5x

Mean 14.1% 15.1% 13.1% 2.8x 2.0x (63.3x) (7.6x) 6.2x 3.8x

Median 1.7% 10.7% 11.2% 2.5x 1.6x 9.9x 7.8x 13.7x 9.3x

Revenue EBITDA

9.31x

0

2

4

6

8

10

12

14

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 CurrentAgroFresh Solutions, Inc. FMC Corp.

Bagfas Bandirma Gübre Fabrikalari AS American Vanguard Corp.

Gübre Fabrikalari TAS The Andersons, Inc.

Mean

Spring 20176

25

16

38

32

29

7

0

5

10

15

20

25

30

35

40

2012 2013 2014 2015 2016 2017 $-

$20,000

$40,000

$60,000

$80,000

$100,000

Number of Transactions Sum of Enterprise Value ($mm)

2118

21

27

23

0

5

10

15

20

25

30

$-

$2,000

$4,000

$6,000

$8,000

$10,000

2012 2013 2014 2015 2016

Number of Transactions Sum of Transaction Value ($mm)

# o

f Tra

nsactio

ns

# o

f Tra

nsactio

ns

En

terp

rise

Valu

e ($

mm

)T

ran

sact

ion

Valu

e ($

mm

)

*

Source(s): FactSet

*Note: 2017 year-to-date Enterprise Value = $215mm

Note: These data represent recorded transactions only, and are not all-inclusive. Nevertheless, they are typically representative of the industry.

Spring 20177

2220

29

33

28

46

34

59 59

52

0.00x

2.00x

4.00x

6.00x

8.00x

10.00x

12.00x

14.00x

16.00x

0

10

20

30

40

50

60

70

2012 2013 2014 2015 2016

Specialty Crop Input Subsector Transactions Total Crop Input Transactions

Total Crop Input EV/Revenue Specialty Crop Input Subsector EV/Revenue

Total Crop Input EV/EBITDA Specialty Crop Input Subsector EV/EBITDA

# of Transactions

Specialty Crop Input 2016 Average

EV/EBITDA 13.7x

Total Crop Input 2016 Average

EV/EBITDA10.61x

Total Crop Input 2016 Average

EV/Revenue1.9x

Source(s): FactSet

Note: Overall these data represent recorded transactions only, and are not all-inclusive. Nevertheless, they are typically representative of the industry.

Specialty Crop Input 2016 Average

EV/Revenue1.7x

Valuation Multiples

Spring 20178

147 M&A Transactions since 2012 29 M&A Transactions in 2016 7 M&A Transactions in 2017 as of 3/20/17 Highlighted M&A Transactions:

Source(s): FactSet

Note(s): * -Major transactions include transactions with disclosed Enterprise Value or by major players.

These data represent recorded transactions only, and are not all-inclusive. Nevertheless, they are typically representative of the industry.

Date Target Buyer

Enterprise

Value

($mm)

EV /

Revenue

($mm)

EV /

EB ITDA

($mm)

Category

12/19/2016 Vale Fertilizantes SA The Mosaic Co. $ 2,760.40 - - Crop Input

12/16/2016 Solbiosur SL Alltech, Inc.; Improcrop Ltd 3.44 - - Specialty Crop Input

11/7/2016 SAPEC Agro SA Bridgepoint Advisers Ltd. 507.21 - - Specialty Crop Input

8/30/2016 Agrium, Inc. Potash Corp. of Saskatchewan, Inc. 17,524.02 1.25x 9.30x Crop Input

8/15/2016 Produquímica Indústria e Comércio SA Compass Minerals Do Brasil Ltda. 657.69 1.89x 11.29x Crop Input

7/17/2016 ADAMA Agricultural Solutions Ltd. Hubei Sanonda Co. Ltd.; China National Chemical Corp. 773.89 0.26x 1.65x Crop Input

6/30/2016 Tratamientos Guadalquivir SL Brandt Consolidated, Inc. - - - Specialty Crop Input

8/16/2015 ADAMA Agricultural Solutions Ltd. Hubei Sanonda Co. Ltd. 4,172.73 1.32x 9.14x Crop Input

8/10/2015 Rentech Nitrogen Partners LP Icahn Associates Holding LLC; CVR Partners LP 839.12 2.44x 9.34x Crop Input

7/1/2015 GrowHow UK Group Ltd. CF Industries Holdings, Inc. 1,228.00 - - Crop Input

5/11/2015 Aquatrols Corp. of America Rural American Fund - - - Specialty Crop Input

4/30/2015 AgroFresh, Inc. Boulevard Acquisition Corp. 811.84 - - Specialty Crop Input

10/20/2014 Arysta Lifescience Plc Platform Specialty Products Corp. 4,855.48 3.22x 19.55x Crop Input

10/15/2014 Improcrop Ltd Alltech, Inc. - - - Specialty Crop Input

10/1/2014 China National Chemical Corp. (4 Subs) ADAMA Agricultural Solutions Ltd.;CNAC International Pte 624.00 - - Crop Input

9/8/2014 Cheminova A/S FMC Corp. 1,800.00 1.57x - Crop Input

8/22/2014 Xinjiang Tecon Holdings Group Co., Ltd. Xinjiang Tecon Animal Husbandry Bio-Technology Co., Ltd. 627.13 0.97x 18.66x Crop Input

8/4/2014 Lemon Ag Services, Inc. Brandt Consolidated, Inc. - - - Crop Input

7/3/2014 Farmura Environmental Ltd. Aquatrols Corp. of America - - - Specialty Crop Input

7/1/2014 Specialty Fertilizer Products LLC Paine & Partners LLC; Verdesian Life Sciences LLC - - - Specialty Crop Input

4/17/2014 Chemtura Corp. (Agrochemicals Business) Platform Specialty Products Corp. 989.32 - - Crop Input

1/2/2014 Turfgrass Management, Inc. DBA Grigg Brothers Brandt Consolidated, Inc. - - - Specialty Crop Input

10/28/2013 Cf Industries, Inc. (Phosphate Mining & Mfg Ops) The Mosaic Co. 1,400.00 - - Crop Input

9/30/2013 INTX Microbials LLC Paine & Partners LLC; Verdesian Life Sciences LLC - - - Specialty Crop Input

4/17/2013 Plant Syence Ltd. Paine & Partners LLC; Verdesian Life Sciences LLC - - - Specialty Crop Input

2/27/2013 Northwest Agricultural Products LLC Verdesian Life Sciences LLC - - - Specialty Crop Input

2/19/2013 Grupa Azoty Zaklady Azotowe Pulawy SA Zaklady Azotowe W Tarnowie-Moscicach SA 671.97 0.55x 3.73x Specialty Crop Input

12/18/2012 Arr-Maz Custom Chemicals, Inc. Golden Gate Private Equity, Inc. 500.00 - - Specialty Crop Input

12/7/2012 Bunge Ltd. (Brazilian Fertilizer Business) Yara International ASA 750.14 - - Crop Input

11/28/2012 Natural Industries, Inc. Novozymes A/S - - - Specialty Crop Input

9/20/2012 Becker Underwood, Inc. BASF SE 1,020.00 - - Specialty Crop Input

9/19/2012 Pasteuria Bioscience, Inc. Syngenta AG 113.00 - - Specialty Crop Input

9/10/2012 Biagro Western Sales LLC Paine & Partners LLC; Verdesian Life Sciences LLC - - - Specialty Crop Input

8/2/2012 Canadian Fertilizers Ltd. CF Industries Holdings, Inc. 2,688.62 - - Crop Input

6/26/2011 Agrotain International LLC Koch Industries, Inc - - - Specialty Crop Input

Average 2,059.91$ 1.50x 10.33x

Median 825.48$ 1.32x 9.32x

Spring 20179

122 Private Placements since 2012

25 M&A Transactions in 2016

Highlighted M&A Transactions:

Source(s): FactSet

Note(s):* - Major transactions include transactions with disclosed Enterprise Value or by major players.1- These private placements may be structured as

equity, debt or some combination of both, and may be controlling or non-controlling investments.

These data represent recorded transactions only, and are not all-inclusive. Nevertheless, they are typically representative of the industry.

Date Target Buyer / Investor1

Transaction

Value

($mm)

Enterprise

Value

($mm)

EV /

Revenue

($mm)

EV /

EB ITDA

($mm)

Category

11/8/2016 The Arab Potash Co. Social Security Investment Fund $ 106.26 $ 1,944.35 3.42x 10.63x Crop Input

7/8/2016 Uralkali PJSC Uralkali Pjsc /Lobyak/ 4,134.29 26,135.39 8.83x - Crop Input

1/25/2016 Verkhnekamsk Potash Co. CJSC Acron JSC 121.07 1,330.39 - - Crop Input

7/8/2015 Target Brasil Fertilizantes Ltda. Brandt Consolidated, Inc. - - - - Specialty Crop Input

6/23/2015 Zhejiang Shenghua Biok Biology Co. Ltd. Zhejiang Shenghua Biok Biology Co., Ltd. Management 103.28 959.50 4.72x nm Specialty Crop Input

3/2/2015 Fertilizantes Heringer SA Potash Corp. of Saskatchewan, Inc. 55.70 942.20 0.45x 7.75x Crop Input

2/3/2015 North Huajin Chemical Industries Co., Ltd. China Zhenhua Oil Ltd. 239.72 3,673.99 - - Crop Input

12/18/2014 Goldmud Zangge Potash Co. Ltd. Jinguyuan Holding Co. Ltd. 1,608.36 1,835.92 6.47x 13.17x Crop Input

12/9/2014 Qinghai Salt Lake Industry Co., Ltd. Government of China; Sinochem Fertilizer Co. Ltd. 630.21 8,306.00 5.50x 18.67x Crop Input

8/5/2014 Galvani Indústria, Comércio e Serviços SA Yara International ASA 318.00 530.00 1.51x 11.04x Crop Input

5/13/2014 Mangalore Chemicals & Fertilizers Ltd. United Breweries (Holdings) Ltd.; Zuari Global Ltd. 0.06 12,162.96 0.46x 5.60x Specialty Crop Input

4/23/2014 Mangalore Chemicals & Fertilizers Ltd. SCM Soilfert Ltd. 10.83 12,203.13 0.46x 5.62x Specialty Crop Input

12/13/2013 Verkhnekamsk Potash Co. CJSC Acron JSC 127.50 1,164.40 - - Crop Input

12/2/2013 Uralkali OJSC URALCHEM OJSC; Agrochem Finance Ltd. 3,777.27 23,175.58 8.34x 17.30x Crop Input

8/12/2013 Hubei Sanonda Co. Ltd.

Makhteshim Agan Industries Ltd.; Government of China; China

State-Owned Assets Supervision & Admn Commission; China

National Agrochemical Corp.; Celsius Property BV

56.81 599.33 1.34x 7.11x Crop Input

7/26/2013 Tessenderlo Chemie NV Picanol NV 254.61 1,607.74 0.59x 8.17x Specialty Crop Input

7/13/2012 Grupa Azoty Zaklady Azotowe Pulawy SA Zaklady Azotowe W Tarnowie-Moscicach SA 63.84 825.59 1.40x - Specialty Crop Input

5/16/2012 Zaklady Azotowe W Tarnowie-Moscicach SA Norica Holding SARL 102.01 922.56 0.59x 3.59x Specialty Crop Input

4/11/2012 Shandong Kingenta Ecological Engineering Co. Youngor Investment Co., Ltd. 131.43 1,081.16 0.83x 10.19x Crop Input

1/3/2012 Actagro LLC Norwest Mezzanine Partners 30.30 - - - Specialty Crop Input

Average 624.82$ 5,522.23$ 2.99x 9.90x

Median 121.07$ 1,469.06$ 1.40x 9.18x

Spring 201710

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Spring 201711

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Spring 201712

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Spring 201713

Director of Agribusiness & Agrifood

Eric has nearly 30 years of Agribusiness operations and investment experience. He also is President and Founder of Bosveld and Associates, a management consulting firm with a mission to assist its clients in building and incorporating business management

▪ Save time and money involved in hiring a full-time business development team

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systems and practices that drive profit, accelerate growth, reduce risk and increase enterprise value. Prior to joining SDR and founding Bosveld and Associates, Eric was the most senior operating executive of the Agronomy Company of Canada (ACC), the 50% partner in 19 joint ventures as part of The Agromart Group, a major crop input distributor network in Eastern Canada.

Eric has served on the boards of numerous agribusiness companies, some for terms of over 10 years. He also was president of two Agromart Group businesses: a grain, feed and crop input supplier and an identity preserved food soybean value-added exporter.

Eric has worked on and completed numerous M&A transactions across a wide range of manufacturing, distribution and service-related businesses in the agribusiness, horticultural, agrifood and green space industries. Eric brings a unique perspective to each of the engagements he participates in.

Eric started his career as an agronomist and holds a B.Sc. and M.Sc. in Plant Science from Dalhousie and McGill Universities, respectively.