Back to top

Analyst Blog

S&W Seed: Another big acquisition drives SANW to number one worldwide

SANW

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

S&W Seed: Another big acquisition drives SANW to number one worldwide.

By Ian Gilson, CFA

On March 17, 2013 S&W Seed (Nasdaq-small:(SANW)) announced that it has agreed to purchase Seed Genetics International (SGI) of Unley, Adelaide, South Australia. The deal is scheduled to close in early April 2013, in time for S&W Seed to capture most of SGI's 2013 seed production. The combined companies will be the largest non-dormant alfalfa seed producer in the world.

The terms are for 865,000 shares of stock, $5 million in cash and a $3 million promissory note. SGI had revenue of AUD$18 million in the 2012 fiscal year ending June 30, 2012 with pretax income of $1.6 million (8.8% pretax margin). Due to bad weather the company sold 5.5 million pounds of alfalfa seed in fiscal 2012, well below its average of 8 million pounds over the past few years.

SGI has access to over 32,100 acres of land of which nearly 70% is under irrigation and the rest has a reasonable rainfall in most years. 75% of the acres are used to grow alfalfa and the rest is mainly under clover (which is also used as bovine and equine food although care has to be taken with clover since certain varieties under certain conditions can be toxic to cows and horses). In fiscal 2013 the overall average price for all seeds combined was AUD$3.27/#, well below the nearly $4.50/# realized by S&W Seed. However, SGI's cost of production is materially lower than S&W's California cost of production.

SGI has a market share of about 60% of Australian seed production and also has access to seed produced in the US, South Africa and Europe. The company has significant sales in South America, where S&W Seed has a minimal presence. The acquisition is expected to be immediately accretive to S&W's earnings.

Please visit SCR.Zacks.com for additional information on our research and coverage universe, and Subscribe to receive our articles and reports emailed directly to you each morning.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.28 +14.66%
ANI PHARMACE ANIP 24.64 +13.97%
E HOUSECHINA EJ 11.01 +9.44%
CANADIAN SOL CSIQ 26.90 +6.87%
KNIGHTSBRIDG VLCCF 12.47 +5.50%