Photograph by Brent StirtonGetty Images

Photograph by Brent Stirton/Getty Images

Thoughts on a big merger

I Googled the Syngenta and Monsanto merger the other day on or own Penton Agriculture website looking for something we call recirculation links - they're designed to help you dear reader as you read an item and want to seek out greater information. What I found is that we had run something online last year about rumors of this get-together. Ironically, in that article we noted press coverage that the deal was stopped back then, and as we know now those discussions continued.

Yep, corporate mergers are not something new to agriculture. From the time that John Deere bought the Waterloo Boy tractor company to today we've seen our fair share of corporate marriages.

As we cover what I call the hardware and the software of this industry here at Farm Industry News we come upon this interesting events like corporate mergers. I debate covering them in some ways because at the end of the day you buy products for your farm, not companies. Yet knowing who owns whom has become an interesting issue around Ag and even the food industry.

For example, Kashi, the organic cereal company is owned by Kellogg’s. And Campbell’s, the soup people own Bolthouse which markets organic fresh veggies and juices. So knowing who owns what may matter.

I got the chance to talk with Brett Begemann recently, he is president and chief operating officer for Monsanto, and we discussed why his company sees value in acquiring Syngenta. But  Syngenta management has rebuffed two offers seen by some as lucrative for shareholders (a 43% premium over market price when the offer was initially made). Recently, Monsanto upped its bid with a $2 billion breakup fee. Syngenta still says ‘no’.

Begemann says that the combined company would spin off the seed and trait business of Syngenta to another buyer. That was always part of the plan, since that represents overlap and Monsanto tech is already widely used in the market. In addition overlapping chemistries would be sold too.

He notes that some have said there would be less choice in the market, but he disagrees noting that every technology available from each company would still be available, just owned by different corporations.

The driver here is the need for technology to feed an ever-growing population, and Monsanto sees the tech Syngenta has as an important path to the future. Syngenta is also active in more parts of the world, which would expand the combined company’s reach.

Some of you reading this may not be a big fan of Monsanto, yet you continue to buy their tech because it works. Syngenta offers a wide range of chemistries across a diverse set of sites of action, critical at a time when resistant weeds are a concern. Yes, they also have atrazine (which has more than 60 weeds that are resistant to it), that still remains a key player in crop protection due to its synergy with other chemistries.

There was talk that if there was a merger, Monsanto might change its name. It could happen, the combined company might take on a neutral new name. Remember Syngenta came from the merger of two other companies – actually the spin off of Ag assets from Novartis and the merger with Zeneca. Right now it's all speculation, though early documents shared to media by Syngenta showed talks of a neutral name and neutral business location. Begemann says the new firm will be run from St. Louis, if it all comes together.

While Monsanto’s pitch seems lucrative enough – and Begemann says shareholders like the offer even if Syngenta management doesn't – Syngenta must decide if it can still go forward on its own. The two companies have been talking for some time. Chances are this merger will happen – or not, which would leave both companies to seek other options.

For you as a farmer, the focus should be on access to the tech you need to be productive and help hit the goals the market demands, which means feeding the 9.5 billion in 2050. I don't have a crystal ball about this, and someone could swoop in and buy either one of these players as a surprise. For the remaining companies in crop protection this merger will have them working to determine the new course forward. Some will buy the ‘overlapping’parts Monsanto will spin off, both to meet key market needs and to keep regulators happy. Others will revamp their marketing and development plans to meet a new competitor.

We've had a lull in major mergers in Ag for awhile, looks like that might be over. At least it gives folks like me something to write about.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish