American Vanguard Corporation History
Newport Beach, California 92660
Telephone: (949) 260-1200
Fax: (949) 260-1201
Sales: $87.0 million (2001)
Stock Exchanges: American
Ticker Symbol: AVD
NAIC: 325320 Pesticide and Other Agricultural Chemical Manufacturing
Amvac is proud to be a global partner in the agricultural industry. Our people are dedicated to providing excellent products and services to ensure better harvests through the new millennium. We look forward to serving your needs and helping the efforts to feed a hungry planet.
- American Vanguard Corporation is formed.
- Amvac Chemical subsidiary is formed.
- Absco Distributing is sold.
- GemChem, Inc. is acquired.
- Axix, Alabama, manufacturing plant is acquired.
American Vanguard Corporation is a southern California holding company, the primary business of which is conducted through its Amvac Chemical Corporation subsidiary. The company manufactures and markets insecticides, fungicides, herbicides, plant-growth regulators, and soil fumigants. In recent years, it has made a specialty of acquiring the rights to niche products that much larger chemical companies have developed but neglected in favor of concentrating their resources on blockbuster products. American Advantage takes acquired brand names and customer lists, then looks for new markets and applications to more fully realize the products' potential. The company does a limited amount of business outside of the United States through operations in Mexico and the United Kingdom. In addition to Amvac, American Vanguard owns GemChem, Inc., a national chemical distributor which also serves as Amvac's domestic sales force, and Environmental Mediation, Inc., which provides a wide range of services regarding environmental issues, including government relations and regulatory strategy.
Incorporated in 1969
American Vanguard was incorporated under the laws of Delaware in January 1969, with Herbert A. Kraft named chairman of the board and chief executive officer. The new holding company then acquired operational subsidiaries in April 1969 by purchasing all of the shares of Absco Distributing, Captive Air, and Manufacturers Mirror and Glass Co. It was Absco that would form the basis of American Vanguard's entry into the chemical business. Absco began business in 1945 supplying a variety of southern California businesses with industrial gases, as well as electrical and gas welding equipment. It purchased liquid oxygen, argon, nitrogen, carbon dioxide, and other specialty gases which it stored in large storage tanks then transferred to smaller cylinders for resale. Absco's customers included construction companies, defense contractors and subcontractors, machine shops, and original equipment manufacturers.
In 1971, American Vanguard entered into another aspect of the chemical industry--pesticides and insecticides--when it acquired Durham Chemical Co. One of Durham's subsidiaries, Alco Chemical Co., was subsequently merged with Durham to form a new entity, Amvac Chemical Corp. It originally acted as a distributor of agricultural chemicals before acquiring the rights to produce some of the products. Through Absco and Amvac, American Vanguard joined the ranks of southern California's many chemical companies. Although better known for film and television, as well as its defense contractors, the area was also home to Dow Chemical, Union Carbide, and scores of smaller chemical companies that made chemicals out of other chemicals, catering to the needs of a wide variety of businesses, such as pharmaceuticals, cosmetics companies, paint manufacturers, and detergent makers. With the proliferation of environmental protection laws in the 1960s and 1970s, however, it became increasingly difficult for these companies to function. Moreover, companies operating in California faced additional safety measures due to the possibility of accidental contamination caused by earthquakes. According to Kraft, American Vanguard recognized that it was entering an era of tighter government control and simply decided that "in order to continue in the chemical business, anytime they would pass a rule we would comply." Over the years, a number of other chemical companies were less responsive and dropped out of the business, allowing Amvac to "fill the vacuum." It was this willingness to adjust product offerings, depending upon industry conditions, that became a signature trait of American Vanguard. Moreover, flexibility was essentially a requirement for a company dealing in chemicals in the final decades of the 20th century. Amvac's agricultural chemicals were under constant scrutiny, often the subject of litigation, and in some cases were banned by the government.
Sell-Off of Absco: 1989
Although there was greater risk in the production of agricultural chemicals, it was this sector that offered more long-term promise to American Vanguard. The company enjoyed a string of record results in the 1980s but was held back by its industrial gases business, which was dependent on other industries that endured tough economic conditions during the decade. In September 1989, management decided to end its involvement in industrial gases, selling the assets of Absco, including some real estate, to Phoenix Distributors for $4.5 million. The name of the Absco subsidiary was changed to 2110 Davie Corporation, a real estate venture, the sole function of which was to own the land that Amvac occupied.
Amvac began to develop its strategy of acquiring niche products from larger companies. In 1989, it purchased from DuPont the Phosdrin line of insecticides, a business it was already involved in, having manufactured Phosdrin for the international market since 1985, supplying Shell, American Cyanamid, and BASF. Phosdrin, however, was a risky acquisition. The chemical was already targeted by Cesar Chavez and his United Farm Workers Union, which claimed that the chemical made workers ill. Phosdrin had been in use since 1953, popular with farmers because it could be used close to the time of harvest. Easily decomposing in water and sunlight, Phosdrin needed only 48 hours before workers could enter a field, provided they wore protective clothing. Whether workers who had become ill had taken necessary precautions was a matter of some dispute. Controversy regarding Phosdrin would continue for several more years until in 1994 American Vanguard agreed to discontinue its domestic production, although the product continued to be sold overseas.
In 1991, Amvac acquired the Naphthalene Acetic Acid plant growth regulator chemical product line from Rhone-Poulenc AG Company. The company had already been a major supplier of the necessary chemicals to Rhone-Poulenc. Also in 1991, GemChem, a national chemical distributor, was hired to serve as Amvac's domestic sales force. (By 1994, Amvac's business grew large enough that American Vanguard elected to acquire GemChem, whose president, Eric Wintemute, was already familiar with Amvac's operations, having worked for Amvac from 1977 to 1982. He now became the chief operating officer of American Vanguard.) Moreover, in 1991 American Vanguard instituted "stewardship contracts" with its distributors. Because it relied so heavily on distributors, the company offered greater potential profits but also required regular monthly reports before payments were issued. In the first year, American Vanguard deducted a large amount of stewardship payments, outraging some of its distributors. Ultimately, however, the tough approach worked. Distributors began to supply the information the company needed and both sides prospered.
Picking up the rights to niche chemical lines was a difficult enterprise for American Vanguard in the early 1990s. Major corporations were reluctant to let go of their products until the small company proved itself. In 1992, American Vanguard gained the non-U.S. rights to the Dibrom insecticide line from Chevron. In 1998, it acquired the U.S. Dibrom business of Valent USA Corporation, which had previously acquired the domestic rights from Chevron. Amvac had been producing Dibrom for both Chevron and Valent since 1981. The next major niche product acquired by American Vanguard came in late 1993, when it purchased the rights to Bidrin, an insecticide used on cotton crops, from DuPont Agricultural Products.
As American Vanguard built up its agricultural chemicals business, it faced mounting expenses in complying with government regulations as well as the cost of litigation, sometimes caused by third parties. For instance, in 1991 a train derailment in northern California resulted in a spill of 19,000 gallons of metam sodium (a soil fumigant made by Amvac) into the Shasta River. The company was named in a class-action suit and a year later agreed to pay a settlement. From 1990 to 1994, American Vanguard was sued by more than 20 California municipalities, water districts, and water companies regarding the leaching of some of its products in normal agricultural use into the groundwater. The company ultimately reached a settlement in March 1995. Because of these and other matters, relations became strained between American Vanguard and both the state of California and the federal Environmental Protection Agency. The man who would endeavor to repair that breach was its new president and CEO, Eric Wintemute, who replaced Kraft in 1994. Because of the company's involvement in regulatory issues it was not surprising that American Vanguard became a major investor in Environmental Mediation, Inc., a California company formed in the early 1990s to assist clients on a wide range of issues, including government relations and regulatory strategy. The relationship between the two companies was not made public until 1998, when Environmental Mediation's president, Wayne Nastri, was appointed by California Governor Pete Wilson to serve on the South Coast Air Quality Management District, the so-called smog board. The press then reported that American Vanguard, in fact, owned a majority interest in Environmental Mediation, resulting in some controversy before Nastri's appointment was confirmed. It was not until its 2000 10K filing to the Securities and Exchange Commission (SEC), however, that American Vanguard would begin to include Environmental Mediation as one of its operations.
Wintemute continued the plan to acquire the rights to chemicals that had an annual sales track of $5 million to $15 million, as well as joint marketing ventures. An example of the latter was an agreement with CIBA, which used CIBA's sales force to sell CIBA's Ridomil product packaged with Amvac's PCNB soil fungicide. Under Wintemute, American Vanguard also
Securing the Rights to Vapam: 1997
After several years having difficulty convincing major corporations to sell them niche product lines, American Vanguard finally gained sufficient credibility that it began to pick up brands at an increasing pace in the late 1990s. In 1997, it gained the rights to Vapam, a soil fumigant used to suppress weeds, manufactured and marketed by Zeneca Inc. The product was a good fit with Amvac because it already manufactured metam sodium, the active ingredient in Vapam. In addition to gaining the U.S. rights to Dibrom in 1998, American Vanguard also purchased the naled pesticide product line from a Valent subsidiary, a substance which Amvac had formulated and manufactured for Valent since 1991.
The year 2000 proved to be American Vanguard's most active year in acquiring mature product lines. In May of that year, the company added its first herbicide, acquiring the worldwide rights to Dacthal from Zeneca. Dacthal was used to control annual grasses and broadleaf weeds in such crops as broccoli, onions, and strawberries. For Zeneca, Dacthal's sales were too small to warrant the necessary support, so that the product had not been effectively marketed for three years, resulting in a loss of 70 percent of its sales. Amvac began to immediately sell Dacthal overseas and several months later began to market it in the United States. Also in 2000, American Vanguard acquired the exclusive U.S. marketing rights to Bayer's Aztec 4.6G, a corn soil insecticide. In addition, Aztec complemented another corn soil insecticide product American Vanguard acquired that year, DuPont's Fortress. In addition to the insecticide, the company gained the "Strong Box" distribution technology, which along with Fortress failed to live up to DuPont's expectations. The closed plastic containers, pre-filled with Fortress, were slotted into a unit towed by a tractor, thereby permitting the safe handling of the insecticide. Aztec and Fortress had competed directly, but now American Vanguard was in a position to also prepackage Aztec in the Strong Box. This meant that farmers, who rotated insecticides, could make fuller use of their investment in the Strong Box system by simply switching off between Fortress and Aztec. In this way, rather than cannibalizing sales, the two products now reinforced one another.
In 2001, American Vanguard again turned to DuPont, this time acquiring a manufacturing facility in Axis, Alabama, which promised to lead to even further growth for its Amvac subsidiary. Not only could the plant double the company's production capacity, it allowed Amvac to branch into a number of other types of chemistries. Moreover, the location offered greater access to markets in the South, Midwest, and East. American Vanguard, as a result, was better positioned to take advantage of current conditions that might free up potentially lucrative product niches. Due to consolidation in the chemical industry, a number of product lines were likely to come on to the market. Moreover, some companies might be reluctant to pay for re-registration of certain products. American Vanguard was also eager to extend the use of Strong Box to new products. Although still generating less than $100 million in annual revenues, the company was consistently profitable and had been trending up for many years. Its program of taking over niche chemicals appeared to be a sound recipe for even greater growth in the future.
Principal Subsidiaries: Amvax Chemical Corporation; GemChem, Inc.; Environmental Mediation, Inc.
Principal Competitors: Aceto Corp.; Crompton Corporation; FMC Corp.
- "American Vanguard on Track for Major Growth," Chemical Market Reporter, November 19, 2001, p. 18.
- Elliott, Alan R., "Rapid Merger Activity Doesn't Bug Pesticide Maker," Investor's Business Daily, February 26, 2002, p. 10.
- Lee, Samantha, "American Vanguard Finds Growth in Old-Line Products," Orange County Business Journal, October 29, 2001.
- Plishner, Emily S., "Expanding Horizons for American Vanguard," Chemical Week, February 15, 1995, p. 62.
- Seewald, Nancy, "Amvac Rakes the Pesticide Fields," Chemical Week, May 5, 2001, p. 41.
Source: International Directory of Company Histories, Vol. 47. St. James Press, 2002.