Agribusiness Value Creators Report: Sowing the Seeds of Recovery (Boston Consulting Group)

Summary

• The 40 global agribusiness companies in BCG's sample generated an average TSR of 7% annually from 2012 through 2016.§1
• Corn prices have fallen by more than 50% since 2012.§1
• The S&P Global 1200 index gained 11% annually during the five-year period, well above agribusiness.§2
• Net debt increased by 67%, diluting TSR by 3 percentage points, and debt to EBITDA grew from 1.8 to 3.2.§4
• Processed-protein producers generated the highest TSR in the sample at 17%.§5
• A pipeline of deals exceeding $200 billion in value involving agricultural-chemical and seeds producers was pending approval in 2017.§8
• If approved, the newly created companies would control nearly 70% of the global pesticide market and 80% of the US corn seed market.§8

Key insights

1. The valuation multiple contributed 9 percentage points to TSR, while fundamental return reduced it by 2 percentage points.§4
2. The ratio of debt to EV increased from 0.2 to 0.3.§4
3. The top ten agribusiness companies each had average annual TSR greater than 13%, providing approximately 3.5 times return on investment.§4
4. From 2012 through 2016 the ratio of output value over input prices rose by 66% for beef, 47% for poultry, and 15% for pork.§5
5. Processed-crop producers generated only a 3% TSR.§6
6. Only fertilizer producers had negative TSR among the five subgroups.§5
7. Three megadeals were announced in agricultural chemicals and seeds: Dow and DuPont, ChemChina and Syngenta, and Bayer and Monsanto.§6
8. M&A activity reached a record high in 2011 but slowed dramatically thereafter, and deal premiums doubled on average.§8