Monsanto and Syngenta Tango

Pam Smith
By  Pam Smith , Crops Technology Editor
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In an exclusive interview with DTN/The Progressive Farmer, Monsanto says it will continue to pursue merger with Syngenta.

ST. LOUIS, Mo. (DTN) -- What's in a name? It meant a lot 15 years ago when Novartis and AstraZeneca merged to form Syngenta, the first global group focusing exclusively on agribusiness. "Syn" has Greek roots indicating integration and consolidating strengths. "Genta" was derived from a Latin word meaning people or community. Syngenta, we were told then, meant "bringing people together."

Now U.S. agribusiness giant Monsanto wants to bring its talents in seeds and traits together with the Swiss-based Syngenta's crop protection expertise. The European company has so far rebuffed all advances, but Scott Partridge, Monsanto Vice President of Strategy told DTN Monday in an exclusive interview that efforts to combine the two companies will continue.

Partridge emphasized the drive to merge the two agriculture powerhouses is not about consolidation. "Instead it's about expansion -- producing a broader set of tools for farmers. It's a way to accelerate innovation by putting two great companies together."

Specifically, he said that Monsanto is interested in gaining Syngenta's broad crop protection portfolio. Monsanto, who started as a chemical company, shifted away from that business as genetic engineering stole the limelight. In fact, Roundup Ready crops and the success of glyphosate are often blamed for the lack of innovation in traditional herbicide chemistry.

"We have a very small set of agriculture chemicals and they have a very broad portfolio of agriculture chemicals," Partridge explained. "They have a lot of research and development in that area and their pipeline in the agricultural space is attractive."

He noted that joint ventures are not as successful as mergers because companies are less likely to allow deep looks at what is really happening. "That depth is what is needed for innovation," he observed.

"Cross pollinating Syngenta's crop protection R&D with Monsanto's seeds and traits R&D, and combining that with efforts in precision agriculture and data collection, is part of broader vision to boost yields and ultimately feed the world," Partridge stated but also acknowledged that it's natural for farmers to be concerned about limited choices when companies come together.

Monsanto has already committed to spin off Syngenta's entire seeds and traits business as it exists today, and Partridge said there is already tremendous interest from other companies in those assets. That means more companies would gain access to Syngenta's germplasm and trait pipelines. Monsanto also has pledged to spin off overlapping chemistries.

"We aren't going to change our business model," he said. "We invent things; we bring them to the marketplace and we broadly license them. So we actually enable our competitors to put those innovations through their system so farmers have that set of choices."

He added that when Monsanto released the first genetic engineered traits, it forced other companies (competitors) to innovate. "If this merger is successful, competitors will have to step up to the plate and innovate faster with better products. That's a win for everyone," he said. He also noted that it was having Roundup (glyphosate) in the stable first that allowed crops to be genetically engineered to resist it.

Next steps. Partridge acknowledged that Monsanto President and Chief Executive Officer Brett Begemann and Robb Fraley, Executive Vice President and Chief Technology Officer, recently traveled to Europe to meet with stakeholders. "It wasn't a trip to target their shareholders, it was to talk to anyone who had an interest in hearing what the transaction is about," said Partridge during a June 16 interview at Monsanto's St. Louis headquarters.

He criticized Syngenta for leaking the confidential offer to the press and using the press to communicate instead of direct negotiations. In response to DTN's questions on those statements, Syngenta Communications Director Paul Minehart responded by email that Syngenta made a full statement of its position in a press release on May 8 (http://bit.ly/… ) and again on June 8 (http://bit.ly/… ) after a second proposal was tendered. The May 8 release indicated the offer was "unsolicited" and " fundamentally undervalues Syngenta's prospects and underestimates the significant execution risks, including regulatory and public scrutiny at multiple levels in many countries."

Last week Syngenta once again spurned a $45 billion offer from Monsanto, despite new assurances of a $2 billion reverse break-up fee if the transaction was unable to obtain necessary global regulatory approvals.

"Syngenta doesn't want to engage," Partridge said. "But we are getting a lot of feedback that their shareholders would like to engage. We have a lot of interest from farmers around the world about what this transaction would mean…they would like to hear more about it and why Syngenta doesn't think it's a good idea," he said.

Partridge said talks with Syngenta go as far back as 2012 and originally Syngenta wanted to relocate the combined headquarters to Switzerland and for Syngenta leadership to run the company. "Those discussions on that basis didn't proceed," he said. "We aren't leaving St. Louis. The operational headquarters of this company, whether in this form or a combined form, will be in St. Louis."

He also denied rumors that the deal is tax motivated. News reports have implied that the merger would allow Monsanto to trim their effective tax rate by 7% to 8% through a corporate inversion -- re-incorporating a company overseas in order to reduce the tax burden on income earned abroad.

"This is essentially a merger of equals. We are not looking to buy a small seed company in Ireland or the Cayman Islands to create a tax advantage," Partridge said.

"We have a tremendous respect for them [Syngenta] or we wouldn't be willing to spend $45 billion," Partridge said. He noted that the $45 billion represented a 43% premium on the unaffected share price when the first offer was made. "That was before they leaked the confidential offer we made to them and their stock has gone up significantly since then -- which is a clear recognition by their shareholders that they like this transaction," he added.

Shareholder pressure to explain what is happening is what Partridge hopes will force Syngenta to the bargaining table. "They are going to need to say something publically about this," he said.

A name change for Monsanto was offered initially, but was removed after Syngenta declined the first offer. Still, what might the name of such a combined company be should the merger go through? Partridge eyes light up at the question. "Got any ideas," he asks.

Pamela Smith can be reached at pamela.smith@dtn.com

(GH/BAS)

Pam Smith