The recently announced mega deal that puts Syngenta AG in the hands of a new owner has left some analysts questioning Monsanto’s role in an agribusiness industry that is rapidly becoming more consolidated.
The major business moves first started in December when Dow Chemical Company and DuPont agreed to a $120 billion merger that will result in a separate agribusiness.
Then – just days after Monsanto shareholders met in Creve Coeur, Mo., on Jan. 29 for the company’s annual meeting – Syngenta reportedly struck an agreement with the state-backed China National Chemical Corporation for $43 billion.
“Syngenta is the world leader in crop protection having significant increased its global market share over the last 10 years,” said John Ramsay, the Swiss-based agrochemical company’s CEO, in a statement. “This deal will enable us to maintain and expand this position, while at the same time significantly increasing the potential for our seeds business.”
Monsanto previously tried to acquire Syngenta with a $47 billion offer of its own. That offer also included a breakup fee if the proposed deal hit regulatory snags.
The seed company’s failed attempt also comes after an announcement that Monsanto will cut more than 3,000 jobs in search of savings.
Nonetheless, top executives say they remain optimistic.
“There’s been a lot of discussion in the industry on consolidation, and we continue to believe there’s room for further consolidation,” said Monsanto President and Chief Operating Officer Brett Begemann during the shareholder meeting. “We are the best potential partner in an industry that is changing.”
As proof, company officials touted Monsanto’s multibillion-dollar sales projections for its research and development pipeline, which includes a type of higher yielding corn produced in collaboration with German chemical company BASF and the next generation of the Roundup Ready platform.
Monsanto estimates its R&D pipeline is valued at about $25 billion in peak net sales.
Other products in the works include new technology that uses microbes to improve crops’ ability to access vital nutrients. Monsanto is also working on a technology that uses gene interference to protect bees from harmful mites.
“I like where we sit today,” Begemann said.
Even though Syngenta may have snubbed Monsanto in favor of ChemChina, business filings show the American seed company has typically outsold the Swiss agrochemicals corporation in recent years.
That was especially true in each company’s 2015 reporting period, as Monsanto reported net sales of slightly more than $15 billion, about $2 billion more than Syngenta.
Business filings show that Monsanto not only sold more, but was more profitable, as well. Monsanto netted about $1 billion more than Syngenta last year.
Despite optimism, some investors may view the fact that Monsanto couldn’t convert on a takeover attempt four years in the making as a sign of diminished stature in the agribusiness sector.
It doesn’t help that in its most recent annual filings with the U.S. Securities and Exchange Commission, Monsanto noted that “our competitors’ success could render our existing products less competitive.”
Recent reports speculate Monsanto could seek to shake its vulnerable perception by further allying itself with BASF, though the German company hasn’t indicated a likeliness to sell any of its pesticide business.