Neogen Expands With Cell Biosciences' Food Safety Asset Buyout

Neogen Corporation (NASDAQ:NEOG) announced that it acquired the food safety assets of Cell BioSciences, an Australia-based key supplier of food safety and industrial microbiology products. Through the asset acquisition, Neogen will now have a direct sales presence across Australasia for its entire portfolio, including food safety, animal safety and animal genomics.

However, Cell BioSciences will continue to operate in its non-food safety markets. The terms of the agreement were kept under wraps.

With the recent asset addition, Neogen aims to strengthen its Food Safety business globally.

A Peek Into Neogen’s Past Acquisitions

Neogen acquired The University of Queensland-Animal Genetics Laboratory in September 2017, thereby adding animal safety and life science products to its offerings, and leading to a surge in its revenues. With the acquisition, Neogen founded a company named Neogen Australasia, Pty. Ltd.

Rationale Behind the Buyout

Following the successful completion of the asset acquisition, the above-mentioned three components of food security are now included under the purview of Neogen’s Australasia operations. The company will run Cell BioSciences’ food safety business under its name and will operate from Cell BioSciences’ existing Melbourne location to ensure excellent customer continuity. Neogen decided to operate this way, in line with Neogen Australasia’s plans to centralize its expanding operations in a future location.

The acquisition will likely enable Neogen to access a wider area to promote, market and sell solutions, including the large vertically integrated beef and dairy companies across Australia and New Zealand.

Notably, Neogen already shares a decade-long partnership with Cell BioSciences under which the latter distributed Neogen’s microbiology and sanitation monitoring instrument systems in Australia. The distributed systems include Soleris for general microbiology, ANSR for pathogens and AccuPoint Advanced adenosine triphosphate test systems. With the latest purchase, Neogen will initially focus on the continuation of Cell BioSciences’ efforts to expand sales of Neogen product lines.

Industry Prospects

Per a report by MarketsAndMarkets, the global food safety testing market is likely to grow from $17 billion in 2018 to $24.6 billion by 2023, witnessing a CAGR of 7.7%. Factors like rising demand for packaged food products, growing incidences of outbreaks of chemical contamination in food processing industries and the rise in consumer awareness about food safety are expected to drive the market.

Given the market potential, the asset buyout has been timed well.

Recent Partnerships & Acquisitions in Food Safety

Neogen partnered with Ripe Technology (a key player in the food industry blockchain segment) in February to integrate blockchain technology into Neogen’s food safety diagnostics and animal genomics. Further, Neogen acquired the U.K.-based Abtek Biologicals Limited (a developer and supplier of culture media supplements and microbiology technologies), thus enhancing Neogen’s current solutions portfolio.

In January, Neogen acquired Italy-based Diessechem S.R.L. (a distributor of food and feed safety diagnostics). The acquisition meaningfully adds to Neogen’s European business as Italy becomes part of its direct sales coverage. In the same month, Neogen also acquired its food safety diagnostics distributor, Productos Quimicos Magiar, which has network in Argentina and Uruguay. With the acquisition, Magiar’s operations will be managed by Neogen’s Latin America operations, and will offer direct sales of Neogen’s food safety, animal safety and genomic products in the regions.

Price Performance

Shares of Neogen have risen 1% in the past year against the industry’s 5.2% decline.

Zacks Rank & Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are ResMed Inc. (NYSE:RMD) , Medtronic (NYSE:MDT) plc MDT and Hill-Rom Holdings, Inc. (NYSE:HRC) .

ResMed has a projected long-term earnings growth rate of 14.5%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.

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