SePRO Corporation is dedicated to discovering and developing sustainable solutions. Founded in 1994 and based in Carmel, Indiana, SePRO is a research based specialty chemicals company that provides products and services for plant management, plant protection and specialty agriculture. SePRO’s products and services are used in multiple end markets including aquatic invasive weed management, algae and water quality, turf and landscaping management, ornamental and greenhouse markets, as well as specialty agriculture. The company acquires, develops, manufactures, and markets value-added products and is the industry-leading provider of application, lab testing and technical support services. SePRO has partnered with several of the top agriculture chemical companies to develop chemistries for use in SePRO’s key markets. Central to its product innovation and technical support services is a 410-acre SePRO Research & Technology Campus (SRTC) in Whitakers, NC.
Top-Down Investment Thesis
SePRO operates in the aquatic invasive weed management, algae and water quality, turf, ornamental, and specialty agriculture markets. According to an LEK market study, the U.S. aquatic herbicide and algae markets are sized at approximately $155 million and $515 million, respectively, and are expected to grow at 8.0%-9.0% and 4.5%-5.0% annually over the next five years. Market growth is being driven by rising global temperatures, increasing both nutrient runoff in waterways and the severity of drought and flooding. These conditions provide favorable environments for aquatic plants, increasing the prevalence of invasive weeds and algae blooms. Invasive weeds and algae have negative impacts on property values, local economies, recreational activities, fish populations and native ecosystems. Customers, particularly state governments and large waterbody management agencies and companies, place a high level of importance on product performance, technical support and application expertise. SePRO is recognized as the market-leader with these capabilities. Additionally, growing emphasis is being placed on sustainable solutions and reduced-risk profile technologies. SePRO leads the industry in research and product innovation, advancing the aquatics industry with new, proprietary, and eco-friendly chemistries, such as ProcellaCOR, that meet these demands.
The U.S. market for cotton herbicides is approximately $265 million, with an estimated $80 million spent on pre-emergent herbicides. Herbicides are critical to cotton growers’ ability to preserve yield, as invasive weeds such as pigweed can infest growing fields and reduce productivity by approximately 30%. Given growing herbicide resistance issues, cotton agronomists have recommended the complementary use of pre- and post-emergent herbicides. SePRO’s new, pre-emergent herbicide product, Brake, has proven to be highly effective and long-lasting with a different mode of action than existing herbicides driving adoption as a rescue tool for farmers facing resistance issues. In addition, SePRO has several biological products in its development pipeline focused on other the specialty agriculture markets for use in both traditional and organic crops with demonstrated activity against viruses, fungi, mildew, foliar bacteria and/or soil-borne pathogens.
The $860 million U.S. turf and ornamental chemicals market is projected to grow at 1.6% annually, with fungicides and plant growth regulators (“PGRs”) outpacing the market growth at 2.5-3.0% annually. Increased use of PGRs is being driven by golf course superintendents and landscaping companies seeking to reduce manual labor associating with cutting faster growing grass and hedges. Increased use of fungicides is being driven by resistance issues to older chemistries as well as the introduction of new products for specialty solutions. End users of this market typically buy through early order, bundled product programs due to a preference for rebates and desire to simplify purchasing. SePRO has highly efficacious PGRs and has new fungicides in development to add to its portfolio that will create a more robust bundled offering.
Buy and Build Strategy
SePRO’s success over the years has been based on its product innovation, proprietary technology and unique technical expertise and service capabilities. As a result, SePRO benefits from exceptional longstanding partnerships with its customers, distributors and suppliers. SePRO is a highly compelling platform for acquisitions due to its industry-leading capabilities, channel relationships and national reach and reputation. The Company is pursuing strategic acquisition and partnership opportunities in the specialty chemicals and agribusiness industries, including companies and technologies focused on plant protection/management, turf management, water quality, specialty agriculture as well as other environmental and horticulture markets. Opportunities could include both traditional and bio-rational solutions, including but not limited to herbicides, fungicides, algaecides, insecticides/pesticides, molluscicides, virucides, biological enzymes, as well as PGRs, soil surfactants and agents, fertilizers and other specialty chemicals.
U.S. Water Services (“USWS” or the “Company”) is one of the largest independent, fully-integrated, industrial / commercial water treatment companies in the U.S., serving a wide range of industrial, commercial and institutional accounts. The Company’s chemicals division offers a comprehensive line of approximately 350 proprietary, branded and blended chemical products and support services. These chemicals improve production efficiency, reduce utility and maintenance costs, protect against contamination/corrosion, enhance compliance regulation and are non-discretionary purchases for customers providing highly predictable and recurring revenue for USWS. The Company’s equipment division offers a complete line of engineered water treatment capital equipment (filtration, softeners, delivery systems, etc.), parts and consumable supplies (filters, membranes, etc.).
Top Down Investment Thesis
The increasing cost of water due to scarcity, quality challenges and environmental policies has driven manufacturers and other water users to employ increasingly sophisticated techniques to treat their water supply for industrial processes and/or discharge. Small and mid-sized businesses often do not have the in-house knowledge to apply more advanced technologies or properly adhere to the evolving regulatory environment. Leading water treatment providers offer customers this expertise on an outsourced basis and can provide the diagnostic support to continuously evaluate the clients’ needs and offer proprietary chemical blends and engineered equipment to meet each customer’s unique requirements.
Buy and Build Strategy
Having completed the recapitalization with Excellere in January of 2011, USWS is actively seeking to acquire and/or partner with other water treatment companies in the United States. Companies serving the food and beverage, utility, microelectronic and other commercial industries would complement USWS current customer base.