A couple of weeks ago we learned that Monsanto wants to acquire Syngenta to form the largest and most complex agricultural input company in the World. Doubts have been voiced about the viability of such merger because of the product range overlap of both companies in the seed sector. Anticipating anti-trust remedies that competition authorities in Europe in USA and many other countries may impose, Monsanto has declared that it would readily divest the whole part of Syngenta’s seed business (to whom remains open: BASF, ChemChina/Adama, DOW, ?). And nothing has been said about a possible re-domiciliation of the company to Syngenta’s headquarters, Basel, Switzerland, to gain a more favourable fiscal status than in St. Louis, Missouri, USA. But this would be a smart move to protect the shareholders from the ravenous US IRS.

From the company strategy viewpoint this merger may make sense for Monsanto; it’s a disaster for Syngenta. Formed 15 years ago by combining the agricultural sectors of the Swiss Novartis and British-Swedish Zeneca, Syngenta had to struggle to define itself a world leader in agricultural inputs. The on-going attempt to transform the company from a product/technology orientation to a wholesome crop solution organisation is a courageous change of paradigm, associated with large implementation difficulties, from R&D to marketing and sales. This extremely difficult to implement strategic move would be smashed by the Monsanto acquisition.

Monsanto’s offer is a combination of 45% in cash and 55% in exchange of share. This is not very attractive to Syngenta’s owners. Too low it does not satisfy their greed; and if it would need to be raised, the pressure on Monsanto’s value would be immense, or said in other terms, the risk to hold Monsanto shares would increase up to an uncomfortable level. This is the negative potential of such share deals where Monsanto may be shooting into its own feet.

But the largest irony is in the Monsanto strategic divagations.

Once a diversified chemical company, manufacturing specialty and fine chemicals, pesticides, pharmaceuticals, sweeteners (aspartame), as well as Nylon fibres, this company went through a series of divestments and acquisitions to ultimately go away from chemistry to focus solely on seeds, believing that all required crop improvements could ultimately been built-in within the plant genetics. The only synthetic chemical that they kept is the famous glyphosate (under the Roundup brand) because of its association with genetically modified organisms (GMO) that are resistant to this herbicide. And now Monsanto is looking forward acquiring the world largest pesticide company, going back to the chemical-biology and synthetic-natural dualities. With their well-trained self-assurance, Monsanto’s managers will quickly need to change their vocabulary, inventing a convenient newspeak to accommodate the change. Thus “traits” may be not only genetic but also chemical, “biotech” will involve small molecules, and “crop yield” will also be derived from the mode of action of pesticides. It will be quite comical to assist to such comedy in which the actors will need to change their genre, if and when it would take place.

 

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