The global food industry expects to see the demand for increased food production jump by approximately 1.7 times from 2010 levels by 2050. That demand will trigger an expansion in farmland needed to harvest this food, and the agricultural materials needed to protect those crops. With Brazil boasting the world’s fifth largest export value of agricultural products — soybeans, corn, sugarcane, coffee, oranges, and beef — the country is primed to emerge as an expanding yet sustainable food production area as it leaves room for agricultural land expansion without deforestation.

To this end, Sumitomo Corporation has reached an agreement with shareholders of NATIVA AGRONEGÓCIOS & REPRESENTAÇÕES LTDA. and NATIVA AGRÍCOLA E REPRESENTAÇÃO LTDA. (collectively, “Nativa”), an agricultural supplies distributor in southeastern Brazil, to acquire all shares of Nativa to make it a wholly owned subsidiary. The acquisition is through Agro Amazônia, a Brazilian-based wholly owned subsidiary of Sumitomo Corporation. The deal is scheduled to be completed by the end of the 2022 fiscal year once necessary approvals from relevant authorities are obtained.

Established in 2000, Nativa is an agricultural supplies distributor with eight locations and a fertilizer manufacturing facility in the state of Minas Gerais, located in southeastern Brazil. In addition to soybeans and corn, the state of Minas Gerais is a region where coffee, fruit tree, and vegetable cultivation and seed production are thriving, especially among small and medium-sized farmers. Nativa has built a strong customer base rooted in the community through the development, manufacture, and sale of unique products that meet customer needs, and through support for farming by agronomists (sales staff with knowledge of agricultural production technology).

Agro Amazônia has been in business since 1983 and is one of the largest agricultural and livestock supplies distributors in Brazil. Sumitomo Corporation acquired full ownership of the company in 2018 and has since contributed to the expansion of Agro Amazônia’s business by leveraging its financing, procurement, and business management expertise. Agro Amazônia is the only company of its kind operating in the entire state of Mato Grosso, with a presence in the states of Goiás, Tocantins, Pará, Rondônia, Mato Grosso do Sul, Maranhão, and Acre. Agro Amazônia employs a trained and qualified team whose goal is to bring to the field products and services that add value to the clients’ business.

“After the acquisition is registered, Agro Amazônia will start to control 100% of Nativa’s operation,” said Roberto Motta, President of Agro Amazônia. “Agro Amazônia is expanding its coverage area to a diversified agricultural area with great growth potential, which encompasses, apart from soybean and corn, coffee, potatoes and vegetables and fruits (onions, garlic, carrots and others).”

“We want to lock-down customers in Minas Gerais with Nativa,” Motta further explained. “As part of this strategy, Nativa will contribute by providing their own specialty and customized fertilizer facility; their sales network, since customers find Nativa reliable and respect the company due to a very good relationship created between them; and their technical knowledge about fruits and vegetables and coffee; and use of their experimental station. This synergy would be further enhanced by Agro Amazônia’s contributions in: crop protection, since we have partnerships with various multinational suppliers; soybean seeds, with our own brand (Dagma) and seeds facility; plant nutrition and agri-services, also with our own product line; livestock, thanks to our very comprehensive portfolio; and our experience in finance and governance.”

“We believe that with the synergy between Agro Amazônia and Nativa, including the strengths of each company, we will have the best portfolio of products and services in the market, thus presenting a great competitive advantage when compared to our competitors,” Motta continued. “Sumitomo Corporation’s team contributed a lot towards the conclusion of this acquisition, specially due to their great experience in M&As, and the whole process was possible thanks to teamwork between Agro Amazônia, Sumitomo and the third-party organizations hired to help evaluate & conduct due diligence of Nativa. With that cooperation, it was possible to conduct the enterprise valuation, our negotiation and the final proposal.”

As part of Sumitomo’s commitment to contribute to society, the company continues to support stable and sustainable food production and the development of local communities and industries around the world. Sumitomo is intent on providing products and services that meet the agricultural needs of each country and region, while utilizing its expertise in the agricultural materials field for business expansion. Likewise, Agro Amazônia contributes to the sustainable development of agriculture through the expansion of its product and service portfolio. It has grown its customer base to approximately 20,000 households, mainly consisting of livestock farmers and large-scale soybean and corn farmers with 1,000 to 10,000 hectares or more. The company is emerging as an industry leader in Brazil, with sales expanding more than five-fold since 2015. With this acquisition, Sumitomo Corporation aims to expand the operation’s sales territory in Brazil and achieve further business growth by linking Agro Amazônia’s extensive product portfolio based on its strong relationships with agrochemical suppliers with Nativa’s fertilizer development and manufacturing capabilities and new customer segments.

From a global strategy perspective, Sumitomo Corporation has positioned agriculture as one of its next-generation growth fields and “Agricultural Input & Service” as a steady business growth category. In the agrochemicals field, Sumitomo Corporation started its agrochemical export business in the 1970s and currently operates an import and wholesale business in 37 countries overseas. In Europe, the company has expanded its value chain by acquiring agricultural supplies distributors. In the fertilizer field, since starting the fertilizer raw material import/export business in the 1950s, Sumitomo has built an integrated business base from importing fertilizer raw materials to manufacturers and selling direct to farmers, mainly in Japan and the Asia-Oceania region.

But why is now the best time for this acquisition? Past collaboration with Sumitomo support paved the way for more of everything, according to Manabu Asakawa, Deputy Department Head, SC Brazil Chemical & Agriculture Department.

“I personally think that our trust of Agro Amazônia management, who have executed this acquisition thanks to the past collaboration and success between us, makes this possible,” Asakawa said. “At the same time, the time to act is now, because I’m sure that Nativa would be acquired in the next five years by someone else if we didn’t move forward. After Sumitomo entered the Brazilian agrochemical retail market, many competitors have been acquiring agri-input retail companies, so I can definitely say that now is good timing for us.”

“Compared to Mato Grosso and nearer states, the Minas Gerais (MG) area has varying crops and farmers’ environments are much different from our current Agro Amazônia areas,” said Asakawa of the reasoning behind the acquisition. “Nativa’s know-how will help us expand the business in MG states, as an agri-input supplier with strong branded items like soybean seed which were developed between Agro Amazônia and top soybean seed suppliers. We can also expand using our integrated corporate strength through financial and administrative advantages. We now have more people who know the market, and that is always the key to success for the next investment or business development initiative.”

We believe that with the synergy between Agro Amazônia and Nativa, including the strengths of each company, we will have the best portfolio of products and services in the market, thus presenting a great competitive advantage when compared to our competitors.