Chinese agricultural group seeks overseas acquisitions

BEIJING - In a bid to improve its competitiveness, China Animal Husbandry Group (CAHG), a major State-owned manufacturer of animal healthcare products, plans to acquire a "certain number" of overseas animal vaccine research institutes, said CAHG President Zhang Chunxin.

According to Zhang, the group intends to acquire research institutes in countries and regions such as the United States, the European Union (EU) and, possibly, in Southeast Asia.

The group did not disclose further details about the plan or a specific investment figure, but "will invest when it is necessary", said Zheng Qingzhi, director and president of China National Agricultural Development Group Co, CAHG's parent company.

Wang Xiaoyue, an analyst at Beijing Orient Agribusiness Consultant Ltd, a major agricultural consultancy, said that now is a good time for the company to make overseas acquisitions.

"Developed economies have been affected by the EU debt crisis. Acquisitions can be achieved at a lower cost," he said.

"China still lags behind the EU and US in animal vaccine research and technology, particularly in vaccines for common diseases. CAHG, already the leader in China's domestic market, will become even more competitive with the new acquisitions," Wang added.

Animal vaccines play a significant role in maintaining China's meat production and securing incomes for farmers. Industry data showed that the country loses 40 billion yuan ($6.2 billion) every year as a result of livestock diseases.

Recent livestock epidemics have also prompted the development of the industry. In November, the media reported that the government was mulling over measures to provide financial support for the industry's development.

According to a recent report from UBS AG, China's animal vaccine market expanded to 8.6 billion yuan this year from 1 billion yuan in 2000. It is expected to swell to 15 billion yuan by 2020 on the back of the rapid growth of the hog industry, the report said.

CAHG has also invested heavily in research and development. In October 2009, the group spent 150 million yuan to set up its own research institute. Its annual investment in research and technology development has stood at 100 million yuan in recent years, a relatively large sum in China's domestic market.

"We now have excellent production facilities and some of our products are very advanced compared with the global industry," said Shen Yonghong, director of the group's factory in Chengdu, Sichuan province.

Shen's factory produces vaccines for 550 million pigs every year. Its products are exported to 16 countries such as Egypt, Mongolia and Vietnam.