Monsanto, Syngenta in mega-merger talks

04 May, 2015 06:05 AM
Getting a deal approved by regulators won't be easy - and may not happen at all

MONSANTO has approached Syngenta about a takeover that would create a giant in the market for seeds and crop chemicals with more than $US30 billion ($38 billion) in revenue.

Getting a deal approved by regulators won't be easy - and may not happen at all. To address antitrust issues and help its case, Monsanto has planned for a deal to include a sale of parts of the combined business.

The biggest concerns may be tied to what would be an unprecedented market share in soybeans and corn seeds for the combined company.

Syngenta's operations in those areas would appeal to a range of buyers from Dow Chemical Co, to BASF SE and Bayer AG, said Colin Isaac of Atlantic Equities LLP.

Syngenta's "seed businesses would be pretty easy to sell for good multiples," Mr Isaac, a London-based analyst, said. "People are always looking to buy share."

DuPont Co. could also be a buyer of any assets that are divested, said Bill Selesky, an analyst at Argus Research Co. There is another possibility: at Dow, activist investor Dan Loeb once pushed for a breakup, and chief executive officer Andrew Liveris has suggested the company is open to divesting its agriculture unit. Monsanto becoming a much stronger competitor could be a catalyst for the $60 billion company to more seriously consider taking the step of exiting that business, which made up about 13 per cent of its revenue last year, James Sheehan of SunTrust Banks Inc said. That segment would be prime pickings for DuPont and its Pioneer seed business, he said.

"That's the deal that I've always expected to happen," Isaac said. "It's attractive for Pioneer and it's attractive for Dow in terms of focusing their portfolio on the chemicals business and raising a lot of cash."

If Dow doesn't want to sell directly to DuPont, both companies could combine their agriculture businesses in a separate entity, Argus's Selesky said.

A $19.5 billion bid by DuPont for Dow's agricultural sciences business could generate a 7 per cent return on invested capital according to a report from Jefferies Group LLC.



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