Syngenta weighs deals in sector shake-up
Syngenta is actively considering deals with rival companies, as the $100bn agricultural industry prepares to be shaken up by a series of blockbuster mergers, the group’s chairman has said.
In an interview with the Financial Times, Michel Demaré said that — having rebuffed repeated approaches from US competitor Monsanto — the Swiss company was now seeking opportunities to combine its strength in crop chemicals with other groups’ leading positions in agricultural seeds.
“We are all convinced that [the sector] will look quite different in six months,” he said, adding that conversations among the leading companies in the sector were “extremely active”.
Apart from Syngenta, which has a market capitalisation of SFr35bn ($34bn), other leaders in the sector include Monsanto, Dupont’s seed business and the agriculture units of Dow Chemical, BASF and Bayer.
Mr Demaré said: “On the crop chemical side, we are the strong leader. On the seed side, Monsanto and [Dupont’s] Pioneer are the key leaders. The winning company in the future will be the one that can combine these two strengths and have an integrated offer.”
He said the bids for his company earlier this year made other deals likely. “This is the result of the Monsanto approach for Syngenta, which for sure has shaken the whole industry,” he said. “It has created the huge activity in which everyone is speaking to each other.”
His comments came as the possibility of a transaction involving Syngenta has been raised again by industry executives and investors.
On Tuesday, Monsanto said it had re-evaluated the purchase of a rival agribusinesses — including Syngenta — less than three months after it abandoned a $46bn hostile pursuit of the Swiss group.
A day earlier, reports also revealed that ChemChina, China’s largest chemicals company, had made an offer for the Swiss group valuing its equity at SFr449 a share, or about $42bn. According to people familiar with the matter, Syngenta rejected the offer from the state-owned Chinese group because it undervalued its business.
Syngenta’s shares are now up 5 per cent since the start of the week, trading at SFr382.40.
Jeremy Redenius, analyst at Bernstein Research, said: “Syngenta is a target or beneficiary of consolidation.” He said that, of the possible combinations, a merger or purchase of Dow Chemical’s agribusiness would bring significant synergies for the Swiss group.
Potential deals among agricultural businesses, especially those selling to farmers, are expected to increase as the plunge in grain prices cuts their revenues and profitability.
However, with the agricultural seeds and chemicals sector already dominated by large international companies, any transaction will be carefully scrutinised by antitrust regulators.
Mr Demaré said: “It is clear that every potential combination has an antitrust risk.”
He said that Syngenta’s search for a new chief executive was on track, following the resignation of Mike Mack last month. Finance director John Ramsay is acting as interim chief executive until a replacement is found. Mr Demaré said: “We want to get it right.”