Move aimed at getting regulatory approval for takeover of its Swiss rival
EXCERPT: Industry sources say acquiring Syngenta is a "compelling need" for Monsanto, as the U.S. seed company known best for its Roundup herbicide and biotech seeds faces mounting threats from both regulatory scrutiny and consumer opposition.
Monsanto says would divest all of Syngenta's seed business
By Carey Gillam
Reuters, 20 May 2015
Monsanto Co., the world's largest seed company, said on Wednesday it plans to divest all of Syngenta Ag's seeds and traits businesses as well as some overlapping chemistry assets to get regulatory approval for a takeover of its Swiss rival.
Monsanto President Brett Begemann said in a statement that U.S.-based Monsanto sees an acquisition of Syngenta as a move toward "redefining the future of agriculture," and is confident it can address regulatory concerns about a combination of the two agrichemical and seed giants.
Syngenta already has rejected a $45 billion offer, but Monsanto continues to pursue a deal.
Syngenta officials reacted swiftly to Monsanto's comments, saying a sell-off of its seeds business would not be enough to allay regulators' concerns about the tie-up.
"The regulatory hurdles are more challenging than implied by the announcement," a Syngenta spokesman said in a statement.
Several industry sources say acquiring Syngenta is a "compelling need" for Monsanto, as the U.S. seed company known best for its Roundup herbicide and biotech seeds faces mounting threats from both regulatory scrutiny and consumer opposition.
Though Monsanto has sought to diversify its business platforms, the bulk of its profits are tied to its long-held glyphosate-based Roundup herbicide and genetic alterations to seeds that make crops impervious to glyphosate herbicides.
But widespread weed resistance to glyphosate has created problems for farmers, and health concerns about glyphosate and glyphosate-tolerant crops are growing.
"I view the deal as being partly a defensive maneuver around managing the chemical glyphosate exposure," Jefferies analyst Laurence Alexander said.
Alexander said glyphosate chemistry and the related crop traits contribute roughly 70 percent of Monsanto earnings before interest and tax (EBIT).
If Monsanto takes over Syngenta, it would gain a broad portfolio of fungicides, insecticides, and other herbicides.
Syngenta's new agrichemical products include one that combats rust disease on soybeans in Brazil, another that uses natural soil bacteria in a seed treatment to fight soybean and sugar beet pests, and a seed treatment that combats pest damage to soybeans, corn, and sunflower.
Syngenta's agrichemical portfolio brought in more than $11.3 billion in revenues last year, compared to Monsanto's $5.1 billion from its herbicides. Each company saw total revenues of more than $15 billion in 2014.
An industry banker familiar with the situation said a Syngenta deal is critical for Monsanto. He said developing just one new agrichemical can take a decade or more and cost $200 million to $300 million, and that Monsanto needs an entire portfolio of new offerings.
"A deal with Syngenta is a necessity for Monsanto's long-term viability as a leading agricultural player," said the banker, who did not want to be quoted by name.
A merger, however, would likely face opposition from environmental as well as farm lobbies who worry that farmers could end up paying higher prices for agricultural inputs.
Monsanto officials say glyphosate remains a key part of the company's future, and said it has signed an expanded commercial licensing and technology agreement with Scotts Miracle-Gro Co to extend its Roundup brand herbicide in the lawn and garden industry, a deal that adds $300 million in gross profit contribution for Monsanto.
(Reporting by Carey Gillam in Kansas City; Ludwig Burger in Frankfurt, Germany, Pamela Barbaglia in London and Oliver Hirt in Zurich; Editing by Paul Simao)