Genus, BCA accelerate Chinese porcine joint venture formation

Agreement cements their commitment to strengthening PIC China’s local business and achieving PRP commercialization in China.

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Genus, BCA accelerate Chinese porcine joint venture formation

Farm Arief Fachrudin

Global animal genetics company Genus has updated its existing strategic porcine collaboration in China with Beijing Capital Agribusiness (BCA), the group’s domestic state-backed partner.

The joint venture aims to strengthen PIC China’s local positioning with 51% owned by BCA and 49% owned by Genus; provide the best possible route to achieving PRRS-resistant pig (PRP) commercialization in China; and accelerate value crystallization with retained future economic rights.

Genus will receive a gross cash payment of USD 160 million and USD 7.5 million accelerated milestone, upon receipt of approval for the formation of the joint venture from the Chinese state-owned assets supervision and administration authority.

Genus will also garner intellectual property royalties on PRP sales in China and dividends from the joint venture based on Genus’s 49% ownership, both consistent with the original agreements.

The transaction is expected to be completed in 2026, subject to Chinese regulatory approvals for the formation of the joint venture.

Original agreements

The original agreements, signed in May 2019, allowed for Genus and BCA to jointly research, develop, register and market the PRP in China.

Under the terms of the original agreements, BCA would pay Genus between USD 120-160 million to establish a Chinese joint venture 51% owned by BCA and 49% owned by Genus following the achievement of PRP regulatory approval and commercialization in China.

The joint venture would include PIC China and BCA’s Future Bio-Tech (FBT) business.

Given the positive progress made to date, the parties have entered into updated agreements to accelerate the formation of this Chinese joint venture.

The companies say this cements their commitment to strengthening PIC China’s local business and achieving PRP commercialization in China.

Strong and successful partnership

“Genus has enjoyed a strong and successful partnership with BCA for several years. The formalization of our relationship through accelerating the joint venture is a positive step towards PIC China achieving regulatory approval for the PRRS resistant pig,” said Jorgen Kokke, Genus CEO.

Matt Culbertson, COO of Genus PIC said: “We are excited about the market potential of the Chinese porcine industry. Combining our industry leading PIC China team with BCA’s strategic progress in China on the PRP program is expected to enable greater delivery of value to our Chinese customers and an additional opportunity for future business growth.”

Liu Jiantong, CEO of BCA, stated that China produces and consumes approximately 50% of pork globally. Pork is deeply ingrained in Chinese culinary culture.

“PIC Genetics and the PRRS resistant technologies will greatly improve the efficiency of Chinese pork production to provide healthy, affordable and sustainable pork for Chinese people. We are proud to partner with Genus to grow the PIC China business and to contribute to our country,” Mr Jiantong added.

Two-stage transaction

The transaction will proceed in two stages.

In the first stage, PIC will receive the accelerated milestone payment of USD 7.5 million and the gross cash payment of USD 160 million, and BCA will acquire 51% of PIC China through a share purchase and additional subscription for new shares. The first stage is subject to Chinese regulatory approvals and is expected to complete in 2026.

In the second stage, PIC China will acquire 100% of FBT, with the consideration and costs necessary to achieve PRP commercialization in China fully funded by BCA from their share subscription. The second stage is expected to be conclude in 2026 and is not subject to additional regulatory approval.

Following completion of the transaction, PIC China will be deconsolidated from Genus’ financial results and Genus’ 49% interest in the joint venture will be equity accounted.

Proceeds from the transaction are currently expected to be used for balance sheet deleveraging and potential additional shareholder returns, in line with the Genus’ capital allocation framework.

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