A few months ago we were talking about Syngenta being acquired by Monsanto, but we all know that fell through right? Since then Monsanto has committed to a data-focused future, and sold Precision Planting to John Deere. Meanwhile, Syngenta has rebuffed the offer of a Chinese chemical giant to buy the Basel, Switzerland based ag-chem and seed company.
Now comes news that Dow and DuPont are talking about a merger. Just a few weeks ago Dow went on the record saying it was looking at a range of options for Dow AgroSciences – looks like that idea got legs in a new way.
UPDATE: This morning (December 11), Dow and DuPont officially agreed to merge in an all-stock deal reported by Reuters. The combined $130 billion company would later be broken up into three parts (as noted below). Links below offer added insight into the deal and what's ahead.
Early media reports were correct, the two companies are coming together as equals and will be called DowDuPont. In addition, Dow takes over full ownership of Dow Corning in the process. The aim all along is for the merged company to then split into three entities.
We’re talking a $60 billion marriage, or it could be $120 billion or even $130 billion, we’ve seen all those numbers today. This is happening at a time when more than $4 trillion in U.S. business mergers have been conducted already this year. There’s buzz that this merger may not happen because the Justice department and other business watchdogs would fight the idea. Earlier this week General Electric and Electrolux stopped their appliance deal due to regulatory concerns.
But if you want to know more, the web is filled with opinions. For example, while Fortune is saying the Dow-DuPont merger is bad for America, over at Forbes a columnist there says the logic running here is “when in doubt buy them out.”
One blogger asked a good question with the concern of why merge and then split up right away, but that’s the plan. This is driven by activist investors that have been haranguing CEO’s at both companies for higher returns, and spin-offs to boost shares. Whether that pays off in the long run remains to be seen. The Wall Street Journal notes that the three entities will all be independent, publicly-traded companies.
And of course, Syngenta is sitting out there as a target too. The company already rebuffed Monsanto for a $45 billion offer, and it later walked way from any merger potential with ChemChina. Given today’s Dow-DuPont news, there’s talk that ChemChina – being reported by the website Benzinga that ChemChina may come back with a sweeter deal of $44.53 billion. That’s higher than the deal Syngenta balked at in November, but isn’t that lower than what Monsanto already offered earlier?
In November there was talk in mid-November that Monsanto might come back to bid on Syngenta again, even though it’s last bid of $46 billion was rebuffed. That $46 billion is higher than the rumored ChemChina business. This just gets better and better.
Regulators will have a big role to play, but consolidation of an industry with the changing market conditions seen in agriculture alone make some of this inevitable.
For farmers, you can count on the fact that the products you trust will still be in the market – but the name of the maker on the label could change. Dow has already made some interesting deals on that score. It’ll take time to see what else comes out of this situation. But it can be fun to enjoy the merger rumors.