WILMINGTON, Del. — Four months after Switzerland-based Syngenta AG gave the cold shoulder to a takeover bid by Monsanto Co., Syngenta’s new interim CEO has shifted gears and is in talks with the DuPont Co. that could produce the industry’s biggest shakeup in years and create an estimated $50 billion company in a winner-take-all for the seed and pesticide industry.
At the same time, however, DuPont may be looking at a better deal with Dow Chemical, according to a report in The Wall Street Journal. But the discussions are at an early stage and may result in no deal, observers speculate.
Dan Turner, a spokesman for DuPont, told Farm World, "The company does not comment on speculation or rumors." Syngenta and Dow did not respond to a request for comment.
DuPont’s new interim CEO and Board Chair Edward Breen was appointed just over a month ago following the forced retirement of Ellen Kullman. He said he was looking at deals when he was appointed, and he is known as a quick deal-maker, having successfully saved Tyco International from collapse after a CEO scandal. Within days of his appointment, Breen jumped to engage in talks with Syngenta, which also showed the door to its CEO Mike Mack just weeks ago.
A shareholder revolt forced Mack out after he refused a $45 billion takeover bid by the St. Louis-based Monsanto, a deal prompted by three years of sagging industry crop prices. Had Syngenta taken the deal, it might have propelled Mack to a possible new leadership role instead of the sidelines.
A Syngenta/DuPont deal would create a gigantic world leader as the largest supplier of seeds and pesticides. Any deal without Monsanto, which started the Syngenta merger talks back in August, poses a threat if its rivals end up creating a much-larger competitor – unless Monsanto sweeps in quickly and prompts a new round of talks, as one industry insider speculated.
Dan Burrows, who writes for InvestorPlace, said, "Don’t be surprised if Monsanto makes another stab at mergers and acquisitions. After all, Dow is clearly interested in ditching its seeds and pesticides business."
Pesticide sales alone have taken a hit this year, dropping 3.5 percent among the industry’s top distributors, according to a report earlier this month by the research firm Kline (see related article).
"Everybody is talking to everybody," Dow Chemical’s CEO Andrew Liveris said in a conference last month when he too revealed he was looking at possible deals for its agriculture division.
The stakes are high for the company that emerges as the new world leader in seeds and pesticides, as crop protection firms look to change formulas. Companies are slowly switching to new biopesticides and away from pesticides that are under attack from consumers who want safer crop-saving chemicals.
A deal combining Syngenta’s and DuPont’s ag units would assume control of about 27 percent of the global pesticide market, according to a report by Morgan Stanley. Such a move would also force Syngenta to dump its seed business to head off any antitrust issues. DuPont already holds 35 and 33 percent of the nation’s domestic corn seed and soybean markets, respectively.
"The natural evolution is to get together, cut costs, combine R&D efforts and get scale," said Ari Gendason, senior vice president of corporate investments for Continental Grain Co., in The Wall Street Journal article.
Continental Grain is an ag-focused holding company that has owned and traded in seed company stocks. Gendason predicted, "If one (merger) happens, more than one will happen."
If any deal with Syngenta takes place, the Basel-based company would keep its corporate base in Switzerland, observers predict. And Morgan Stanley says if a deal is struck between Dow’s agricultural operations and DuPont’s, the combined company would control 17 percent of the global market in pesticides. Such a deal would leave Syngenta and the Bayer Co., a close No. 3, behind.
Last year, DuPont’s former CEO Kullman rejected a deal to spin off its agriculture unit, saying the move would be costly and did not provide any real benefits to the company, according to various reports.
