Beijing, China (July 25, 2018) - Origin Agritech Ltd., an agricultural biotechnology trait and corn seed provider, announced that the company received the asset sale proceeds of RMB 24.14 million from the first closing of the asset sale transaction (First Closing) from Beijing Shihui Agricultural Development Co., Limited (Beijing Shihui or the Buyer), with this payment, the first phase of sale is completed.
The company will work with Beijing Shihui to cancel the second phase for the sale of its commercial seed business. Origin and its subsidiaries entered a Master Transaction Agreement with Beijing Shihui on September 26, 2016, to sell portions of its commercial seed business.
Under the agreement, the sale was to be in two separate phases. The first part of the transaction (First Closing) called for the sale of the assets under the subsidiaries Denong Zhengcheng Seed Limited (Denong), Changchun Origin Seed Technology Development Limited (Changchun Origin), and Linze Origin Seed Limited (Linze Origin) for an aggregate purchase price of RMB200 million (including debt assumption), which was later modified to RMB221 million.
The second phase of the transaction (Second Closing) was to include the assets under the newly created entity Zhengzhou Origin including a seed processing plant in Zhengzhou, China, the seed distribution business of Beijing Origin Seed Limited (Beijing Origin), and the company headquarters building in Beijing. The Second Closing called for the Buyer to deliver to the Company an aggregate of RMB190 million (including debt assumption). The Buyer prepaid RMB10 million of the consideration to the Company at the signing of the Master Agreement.
With the current payment of RMB24.14 million from the Buyer, the First Closing now is completed. The company has reviewed the Second Closing and believes that it is in the best interest of the Company, at this time, to cancel the Second Closing. With the cancellation of the Second Closing, the company will continue to own the seed processing plant in Zhengzhou, the distribution business of Beijing Origin and the Beijing headquarters building. The distribution business of Beijing Origin represented over 70% of total corn seed revenue during 2017 planting season.
The company believes that the assets to be retained are more valuable to the company at this time partly because they can generate significant cash flow and potentially can result in meaningful earnings for the company. More importantly, the company believes that the potential for the GMO technologies to be commercialized in China has increased recently. If the GMO technologies can be commercialized by 2020, as suggested by an announced plan from the Chinese government, the combined assets of the company's GMO technologies and distribution business could prove of significant value to the shareholders.
"At this point, it's important for us to focus on the new strategic directions we have announced previously and pursue cancellation of the Second Closing so that the Company is able to move ahead with its plans," says Dr. James Chen, Chief Executive Officer of Origin. Dr. Chen states further, "the increasingly positive attitude from the Chinese government toward corn seed GMO technologies could allow us to realize a better value if we keep portions of our Chinese commercial corn seed business."
The value of GMO technologies is beginning to be recognized by the Chinese government and public, especially after the recent heightened visibility in the media of trade negotiations between the United States and China. The cracking down of the illegal GMO corn seed production in China also demonstrates action by the Chinese government to better control the commercialization process of GMO technologies. A recent publication from the Chinese Ministry of Agriculture and Rural Affairs has placed GMO technologies as a key agricultural green technology. Even though past slow government and public acceptance of GMO corn seed technologies in China has delayed the realization of the Company's technology investments, management believes the Company's leading position and readiness in corn seed GMO technologies could eventually result in a significant value to its shareholders.
Origin Agritech Limited, founded in 1997 and headquartered in Zhong-Guan-Cun (ZGC) Life Science Park in Beijing, is China's leading agricultural biotechnology company, specializing in crop seed breeding and genetic improvement. Leading the development of crop seed biotechnologies, Origin Agritech's phytase corn was the first transgenic corn to receive the Bio-Safety Certificate from China's Ministry of Agriculture. Over the years, Origin has established a robust biotechnology seed pipeline including products with glyphosate tolerance and pest resistance (Bt) traits. Origin operates breeding stations nationwide located in key crop-planting regions. Product lines are vertically integrated for corn. For further information, please visit the Company's website at: http://www.originseed.com.cn or http://www.originseed.com.cn/e....