Ancom launches into agrochemical and animal health activities

PETALING JAYA: Ancom Bhd’s 100% subsidiary, Ancom Crop Care Sdn Bhd, has entered into several share sale agreements to acquire an 80% stake each in Shennong Animal Health (Malaysia) Sdn Bhd and Vemedim Sdn Bhd for 23, 92 million RM in cash.

Shennong Group is mainly involved in the manufacturing and trading of chemicals and animal health products which include antibiotics related to livestock, feed additives, supplements and disinfectants mainly for the domestic market.

The proposed acquisition comes with a profit guarantee of RM 4.6 million of after-tax profit per year for fiscal years 2022 and 2023 of the Shennong Group. The valuation of RM 23.9 million results in a price / earnings multiple of 6.5 times based on the guaranteed profit of RM 4.6 million.

Ancom CEO Lee Cheun Wei said expanding its agricultural chemicals market footprint from its major plant-related chemicals to include livestock chemicals is in line with his goal of positioning Ancom as a provider of integrated solutions in the food supply chain.

“As global economies grapple with rising inflation and rising food prices, we believe businesses critical to sustaining and securing livestock supplies, such as the Shennong Group, are poised to grow. Locally, we are witnessing government initiatives to improve the country’s level of self-sufficiency. According to market research, the Malaysian animal health and nutrition market is expected to grow at a compound annual growth rate of 4.3% between 2020 and 2025.

“Overall, the proposed acquisition is a synergistic action for us. As the Shennong Group is also involved in the agricultural chemicals business, we see synergistic benefits where we could leverage our distribution network to increase the reach of our new addition in the market. At present, Shennong Group mainly serves the domestic market, but with Ancom’s experience, resources and vast geographic footprint in more than 40 countries, we are confident in raising the new business to a level higher, ”said Lee.

Boyd S. Abbott