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Monsanto seed-market share may pose obstacle to Syngenta dealqrcode

May. 4, 2015

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May. 4, 2015
Monsanto Co., the largest developer of genetically modified crops, would face renewed antitrust concerns if it agreed to buy Syngenta AG because the combination would have an unprecedented market share in corn and soybeans.

Monsanto has approached Syngenta about a takeover, almost a year after a previous attempt failed, according to two people familiar with the matter. To address antitrust issues, Monsanto has planned for a deal to include a sale of parts of the combined business, one of the people said last Thursday.

St. Louis-based Monsanto already has more than 31 percent of the worldwide corn-seed market and more than 34 percent in the U.S., according to data compiled by Bloomberg Intelligence. Buying Switzerland’s Syngenta, which has a market value of about 29 billion Swiss Francs ($31 billion), would increase its share to almost 40 percent globally and 45 percent in the U.S.

A similar dynamic is at play in soybeans, said Jason Miner, a Skillman, New Jersey-based Bloomberg Intelligence analyst. Antitrust regulators probably wouldn’t approve letting Monsanto’s seed-market share become so dominant, he said.

“You’d quickly approach 50 percent market share in corn and soybeans,” Miner said by phone last Thursday.

Monsanto’s dominance in the seed industry was the subject of U.S. antitrust probes at federal and state levels a few years ago. The U.S. Department of Justice’s antitrust division dropped its probe into possible anti-competitive practices in the seed industry in 2012, and at least seven states led by Iowa subsequently ended their five-year investigation without taking action.

‘Marketing Challenge’

The companies held preliminary talks last year with advisers about a combination, before Syngenta’s management decided against negotiations, people familiar with the matter said in June. Concerns were raised about the strategic fit, antitrust issues and relocating the company, one of those people said at the time.

Relocating Monsanto to Switzerland would cut its tax bill. Miner said it also could alienate the company’s most important customer base: U.S. farmers.

“There is a marketing challenge in pulling up roots in the U.S.,” Miner said. “It’s a customer that is maybe more sensitive to that.”

Meanwhile, Monsanto has tripled its long-term borrowings in the past 18 months to $7.9 billion, partly to buy back shares. The higher level of indebtedness means the company might decide to fund some of the deal by issuing equity rather than selling bonds, Miner said.

Source: Bloomberg

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