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Bayer says Monsanto-Syngenta deal would prompt industry reviewqrcode

Jun. 24, 2015

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Jun. 24, 2015
A successful attempt by Monsanto Co. to buy Syngenta AG and form an agrochemical powerhouse would prompt major rivals to also reconsider strategy and review cross-licensing deals, said the head of Bayer AG’s CropScience unit.

“It would definitely force a review of how everybody is going to react,” Liam Condon said in a phone interview from the division’s headquarters in Monheim, Germany. “There’s only six research and development based players in this industry so if the two biggest were to go together, inevitably it would force others to review their strategies.”

After its first $45 billion bid for Syngenta was rejected, Monsanto is lobbying the Swiss company’s shareholders to put pressure on management to start talks. Bayer, in the process of selling its diabetes-device unit and listing its plastics business, generally likes to play an active role in consolidation rather than just be a bystander, Condon said, while declining to comment on what the company would do in the case of a combination of the two rivals.

Bayer would be a candidate to buy Syngenta’s seed business, which Monsanto would need to sell for antitrust reasons, chemical analysts at Bernstein and Credit Suisse have said. Monsanto already pitched the idea to Bayer last year, people familiar with the matter have said. Bayer has a “clear” view on how to respond in the event Monsanto proceeds with its takeover plan, Condon said.

Activist Investors

The top six companies have about 70 percent of the $64 billion global crop protection chemicals market, according to Jeremy Redenius, an analyst at Bernstein. Calls by activist investors for divestments at U.S. rivals Dow Chemical Co. and DuPont Co. could bring more assets onto the market.

With sales of $10.4 billion at the CropScience division, Bayer is the second-biggest maker of crop protection chemicals behind Syngenta, which has $11.4 billion, Redenius said in a note to investors. BASF SE, Dow, Monsanto and DuPont follow with smaller operations.

To gain regulatory approval, Monsanto is willing to divest overlapping herbicides as well as the seeds and traits unit that analysts estimate has a value of 8 billion to 10 billion euros.
Combining Monsanto and Syngenta would also mean unravelling an intricate web of agreements spanning research, licensing and production.

“There’s an awful lot of cross-licensing,” Condon said. “So companies would need to review what that means for the interdependencies as well.”

Licensing Agreements

Most of the six biggest suppliers have licensing agreements with each other, and sometimes legal disputes arise over use of technology. DuPont and Monsanto reached a technology licensing agreement on soybeans two years ago to end a legal battle. BASF works with Monsanto on herbicides for soybeans, cotton, corn and canola crops and jointly they developed higher-yield, drought-tolerant corn seeds for the U.S. market. Bayer has licensing agreements with each of its peers in seeds technology.

Still, until there’s clarity whether Monsanto will succeed in buying Syngenta, Condon sees no need to change course.

“We’ll continue to implement our current strategy and, as things play out, see if we need to adapt it as we go along.”

Source: Bloomberg

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