Monsanto operating chief sees a crop of seed and chemical deals
Deal activity in the seeds and chemicals sector, which has seen the multibillion-dollar merger of DuPont of the US and rival Dow Chemical as well as ChemChina take over Swiss group Syngenta, is likely to continue, according to a leading executive at Monsanto.
“I’m not convinced that consolidation is over in this space,” said Brett Begemann, president and chief operating officer of the US agricultural group, whose unsolicited offer for Syngenta was rebuffed last year.
While he was not aware of any imminent moves, he added that some less efficient companies may seek to be taken under the wings of stronger rivals. “If they choose to do that, we are open to conversations,” he said.
The continuing focus on food security among some governments will also drive deals, he added, pointing to the ChemChina and Syngenta transaction.
Mr Begemann said that Monsanto was comfortable as a standalone business but would continue to look at possible deals when they arose. “I suspect there’ll be opportunities. If it makes sense we’ll look at those,” he said.
The commodities rout, which has also spread to agricultural raw materials, has hit farmer incomes and squeezed margins for agricultural businesses. Analysts at BMI Research said reduced growth prospects meant that M&A activity would remain high.
“We expect more of these types of deals to take place over the coming quarters as the industry makes a strong push towards acquired sales growth to compensate for reduced organic growth,” said BMI.
Mr Begemann said he did not expect the ChemChina and Syngenta deal to affect the sector. “It was a geographic move,” he said, adding that the deal would not alter Syngenta’s “challenges”.
“The challenges that they have in their own portfolio, I don’t think that changes with the transaction with ChemChina,” he said, especially since it took 5-6 years to create new seeds.
Mr Begemann shrugged off concerns among some agricultural officials in Washington that the Syngenta merger could lead to the Swiss company’s genetically modified seeds winning preferential treatment from Chinese authorities.
Monsanto has a seed joint venture in China with state-owned Sinochem, where the Chinese company owns 51 per cent, and Mr Begemann said he had no reason “to be concerned about not having a level playing field”.
If that was not the case, “that raises a whole different set of questions”, he added.
GM grains and oilseeds are banned in China although Beijing allows the import of crops which are processed or for use as animal feed. Seed companies, including ChemChina, expect the Chinese government to relax the edict as Beijing tackles food security.