In September, MGK, a leading supplier of insect control products, sold a majority interest in the company to Sumitomo Chemical Co. (SCC), a longtime shareholder and partner of the Minneapolis-based chemical supplier. PCT magazine recently touched base with MGK President Steve Gullickson to learn more about the transaction, which caught many in the industry by surprise, and MGK’s future plans for the pest management industry.
Q. Sumitomo Chemical became an MGK shareholder in 1989. How would you describe the working relationship with Sumitomo since that time?
A. MGK has had a very good relationship with Sumitomo Chemical since even before SCC’s investment in MGK in ’89. MGK has benefitted from the technology SCC has brought to the U.S. and Canadian markets. In fact, MGK has over 250 products registered, with the majority using SCC technology. We collaborate on a wide range of projects always with a goal of developing even better insect control solutions.
Q. Why did MGK and the Gullickson family decide to expand its relationship with Sumitomo at this time?
A. There were a number of factors involved in the decision, but the primary ones were SCC’s interest in increasing its investment in MGK and the opportunities MGK is developing, and the opportunity for MGK to more aggressively pursue certain growth strategies supported by SCC. Importantly, the decision to move on this deal was purely driven by opportunity. The result of this change of ownership of MGK is an enhanced ability for MGK to deliver on its mission of making life healthier by creating responsible products that protect people and their environments from the impact of insects.
Q. What is it about Sumitomo Chemical that made the transaction so attractive to MGK?
A. Primarily, our long-term relationship with SCC. Also, the benefit from aligning with one of the only companies in the world that has people dedicated to looking for technology that can be used to control public health pests, especially mosquitoes, flies, roaches and ants. We also like the fact that SCC plans with a long-term horizon, like MGK has always done. We expect that we will be able to bring new products to market with innovative technology for decades to come.
Q. Conversely, what is it about MGK that made the transaction so attractive to Sumitomo Chemical?
A. MGK has developed a good business model that is attractive to SCC. Quite honestly, the topic of SCC taking a larger investment in MGK has been part of our dialogue for many years. I think the primary reason the deal was completed at this time was the general trend of MGK’s business combined with SCC’s interest in enhancing their business through business designs like MGK’s.
Q. Did the Gullickson family have any reservations about no longer being the majority stakeholders in the business? Why or why not?
A. Of course, selling a business that has been in the family for so long was not easy. My family is quite happy with the result, which is why we remain invested in MGK, because we know the business will continue to perform quite well, but we are now a minority investor, rather than the majority. SCC offers resources and technology that will help spur incremental growth for MGK. It was the right decision to ensure these resources will be applied to MGK’s business.
Q. Were there any specific market factors that prompted the Gullickson family to sell its majority stake in the business at this time?
A. There was no one factor that drove the decision. It really was a combination of things that all came into alignment resulting in all of our family members agreeing on the decision. The result is good for my family, good for MGK and good for Sumitomo.
Q. How will the enhanced business relationship with Sumitomo benefit pest management professionals on the front lines of the industry?
A. MGK will remain focused on developing insect control solutions that enhance health and the environment. PMPs can be confident that MGK will be offering products that incorporate technology that provides benefits PMP can count on. MGK’s standards for product performance will remain exceptionally high, which is in line with how Sumitomo manages their product development.
Q. Will Sumitomo’s more prominent role in the business provide MGK with greater access to new active ingredients/enhanced technologies? If so, what product innovations may be on the horizon as a result of the expanded business relationship?
A. We expect to bring new technology in the form of active ingredients, as well as in other facets of product enhancements to the market on an ongoing basis. Sumitomo’s greater participation in MGK’s business will ensure MGK’s pipeline of concepts is expanded and our capability to work products through our systems is improved.
Q. Tell us something about Sumitomo Chemical that might surprise pest management professionals since it’s a company that is not as well known in the North American pest control market as some other multi-national players serving the industry.
A. Sumitomo is one of the only companies in the world that develops pesticides specifically for use in the non-agriculture markets, especially in the area of public health insect control. They have scientists that go to work every day with a single objective of finding better solutions for controlling insects of concern like mosquitoes, flies, ants, roaches and stinging insects. Of course, bed bugs are definitely on the radar today.
Q. As president of the company, what does the enhanced relationship with Sumitomo Chemical mean from a day-to-day management perspective for MGK?
A. For the most part it is business as usual for MGK. As I noted, Sumitomo likes the business that MGK has developed, particularly our branded PCO product business. We intend to continue to invest in this business to build a better portfolio of products supported by a well-trained sales and marketing team.
Q. How did MGK’s employees respond to the announcement?
A. MGK’s employees have been great throughout this process. They have remained focused on conducting our business well. I can honestly say they have done a tremendous job of not getting distracted during the negotiations, due diligence and other aspects of the share sale. I am extremely proud of the entire MGK team. They are great to work with.