Bovine breeding company Genus is set to become the world’s leading animal genetics business with the takeover of Sygen International, a move which should benefit thousands of farmer shareholders.
Sygen, which includes the Pig Improvement Company, specialises in high-technology pig and shrimp genetic improvement.
Genus chief executive Richard Wood said the acquisition would help spread the risk of being involved with just one species.
The deal, which is based around an offer of 63.2p a share – 55% more than the average price over the 12 months to 11 October – values Sygen at about 187m.
Although this is more than Genus is currently worth, Mr Wood was confident the business could afford it.
“Both businesses are highly cash-generative, debt levels should come down quickly.”
Combining the two firms’ research and development programmes would also increase the possibility of a major breakthrough, he added.
“At the moment, for example, you can’t freeze pig semen because it is not robust enough.”
Mr Wood said the bid would be funded by a new placement of almost 17m Genus shares, which would raise 55m, as well as new bank facilities totalling 180m.
Genus has also just disposed of Genus Express, its veterinary wholesale business, for 8m.
Shareholders, many of whom are farmers who received free shares when the Milk Marketing Board was disbanded, should benefit, said Mr Wood.
Once the deal had gone through, 62% of Genus’s equity would be owned by institutional investors and this would make the firm’s shares easier to buy and sell.
Coupled with a planned move from the Alternative Investment Market to the main London stock exchange listing, this should allow the firm’s share price to reflect better its true value, reckoned Mr Wood.
City analyst Oriel Securities tipped Genus shares, now trading at about 350p, as a buy.
It said the new business could be a “real world-beater” if it pulled off the integration successfully.
Peter Crichton, an independent pig consultant, said the deal should be good news for pork producers because the industry needed more investment to continue the work on breeding sturdier animals that were more resistant to pig wasting diseases.