Syngenta Sees Risks for Farmers, Competitors in Proposed Merger

July 17, 2015 12:00 PM
Syngenta Sees Risks for Farmers, Competitors in Proposed Merger

Talk about a difference of opinion. While Monsanto reaches out to farmers and investors in the U.S. and overseas about the reasons for its proposed $45 billion merger with Syngenta, the Swiss-based Syngenta sees nothing but risk for farmers, investors, and the company itself.

That has been the position of Syngenta since this spring, when the news of Monsanto’s proposal—and Syngenta’s rejection of it--became public. Even Monsanto’s offer of a $2 billion breakup fee, should the deal go south, wasn’t enough to get Syngenta back to the table.

“Syngenta has made its position clear,” Paul Minehart, Syngenta’s head of corporate communications, North America, told AgWeb this week. “The board unanimously believes that Monsanto’s proposal is not in the best interest of Syngenta shareholders, customers and other stakeholders. Syngenta rejected the current proposal because it significantly undervalues Syngenta and its future prospects, provides wholly inadequate compensation for the very significant regulatory risk, and has significant execution risk.”

The company also believes that such a deal would result in a dramatically different seed landscape for farmers in the U.S. and abroad.

“Syngenta is a truly global company,” Minehart said. “We span eight key crops and have a broad area of technology across crop protection, seeds and traits. Our sales in emerging markets are more than 50% of our total revenues. While the Monsanto seeds business is bigger, it is also much narrower. So putting the two companies together would only increase the critical mass in two key crops, corn and soybean, and would only be focused on the Americas where Monsanto has strength.”

Syngenta leaders, as many farmers have, also expressed concern about the potential size and market dominance of the new company going forward. While Monsanto has said it would sell Syngenta’s seed business, Syngenta believes that would damage the effectiveness of its crop protection products—which are one of the main drivers for Monsanto’s offer.

“The combination would create a dominant leader in the agricultural sector accounting for over 50% of a farmers’ input cost on seeds and crop protection chemicals in a number of markets,” Minehart said. “If Monsanto were to sell all of Syngenta’s seeds business, they wouldn’t have an integrated strategy in emerging markets. Syngenta focuses on eight key global crops, while Monsanto focuses largely only on corn and soybean. So, they would have nothing to complement our crop protection business in rice, cereals, sunflower etc., which will be a significant disadvantage to farmers. Syngenta has been investing heavily in these eight crops to improve yield and provide other benefits for farmers. That would be at risk under Monsanto’s proposal.”

What does Syngenta think will happen to seed and input prices if the deal goes through? “We can’t speculate on this, as prices are determined by a number of factors,” said Minehart. “But we do know that growers are skeptical that they will benefit.”

Monsanto sees the situation very differently.  In interviews and speeches, executives have suggested that the depth and breadth of the combined company will result in more advanced agricultural products and sophisticated data services to farmers.

“When you look at the challenges that agriculture faces, agriculture needs innovation to continue to drive the productivity of agriculture, and I think this a really golden opportunity to do this,” Brett Begemann, Monsanto’s COO and president, told AgriTalk’s Mike Adams in June.

While the promise of a highly integrated package of seed, crop protection and precision ag data might be incredibly appealing to some producers, other farmers are wary about being so dependent on a single company. “Does anyone honestly think this is in the best interest of farmers? I don’t think so,” an Illinois reader commented on AgWeb in June, referring to the proposed merger.

Syngenta also has reservations about a company offering that level of integration to growers.

“If Monsanto dominates seeds, crop protection and on-farm data, they could create whole-farm offers in which they become a sole source, or at least major source, for a farmer and lock-in the farm for multiple years, e.g., like a consumer cable company that offers CATV, phone and Internet on a multi-year contract,” Minehart said. “There hasn’t been nearly enough discussion regarding data in this situation—or data privacy—which is one of the crucial topics facing businesses and consumers today.”

What do you think of the proposed merger? What do you see as the potential risks--and benefits--to farmers if the deal goes through? If the two companies remain separate? Let us know in the comments.

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Spell Check

Kevin Hartwig
Bennett, IA
7/18/2015 11:55 AM

  The idea that being put together would be Better for the farmer, is Wrong. Monsanto's past history has proven, keep paying Higher and HIGHER Tech fees, for technology we have paid for countless times over and over again. I like and use all of it But, KEEPING ALL COMPETITORS DOES KEEP PRICES IN CHECK! I don't feel any company is worth my trust in them to do the right thing. JUST TRY AND THINK, WHERE IN THE WORLD DOES MONSANTO GET THAT MUCH MONEY FROM, just maybe tech fees! HUMMM!

Bob O'Rourke
North English, IA
7/23/2015 07:19 AM

  Monsanto is not for the farmer. How can corporate communism be good for farmers

omaha, NE
7/19/2015 03:53 PM

  when i look at industry groups like Big Ag, Big Pharma, Big Chem, there are several common companies that thread through. Monsanto, Dupont are for all intent and purpose monopolies, who are virtually protected by Congress from antitrust actions. As an independent producer, like the impact of Walmart on small town retailers, Monsanto, Tyson, and others have a worse impact on Many independent farmers. Monsanto is not our friend. Nor are politicians and judges that protect them from anti trust litigation