Overview of the Monsanto and Syngenta deal
Recently, Syngenta AG (SYT), the world’s largest pesticide company, started talking about deals with global agrochemical players such as Monsanto (MON) and ChemsChina. Initially, Monsanto expressed its interest in acquiring Syngenta in May and announced a takeover bid of $46 billion in August. However, Syngenta declined Monsanto’s offer primarily due to the lower valuation. Later, Monsanto withdrew its takeover bid.
On December 18, 2015, John Ramsay, the interim chief executive officer of Syngenta, said that Syngenta is seriously looking for a deal with the global agrochemical players including Monsanto. This is probably to enhance its market position in the agricultural chemical space to counter the recent merger between the two agrochemical giants Dow Chemical (DOW) and DuPont (DD).
On December 22, 2015, Syngenta’s chairperson Michel Demare also said that the company is negotiating a deal with Monsanto and ChemsChina, but hasn’t received the takeover bid yet. Wall Street reacted positively to this news and Monsanto’s stock rose 3% while Syngenta’s stock rose 7% since December 18, 2015.
Monsanto is the world’s leading agricultural chemical company with a presence in more than 150 countries. The company produces biotechnology seeds, herbicides, biotechnology traits, and precision agriculture products to improve farm yields and lower costs for farmers. The company has two product segments, namely Seeds and Genomics and Agricultural Productivity. It has reported total sales of $15 billion in 2015 with the total market capitalization of $43 billion as of December 29, 2015.
Syngenta, a European company, is also one of the world’s largest agriculture companies with a presence in 90 countries. Syngenta’s products include crop protection, seeds, as well as lawn and garden products. Its major crop protection products are herbicides, insecticides, fungicides, and seed treatments. The lawn and garden business provides flower turf and landscape, as well as pest control products. The company has generated total sales of $15 billion in 2014 with the total market capitalization of $37 billion as of December 29, 2015.
This isn’t the only deal in the pipeline, as other major players are also involved in mergers and acquisitions deals. We’ll discuss the industry consolidation in our next part before discussing the MON–SYT deal in detail. The Materials Select Sector SPDR (XLB) ETF, a major chemical ETF, primarily tracks the performance of major chemical players. MON forms 8% of XLB’s total holdings.
Monsanto has been looking for an M&A deal due to the immense pressure from its shareholders to improve its business prospects and financial performance.
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