As a number of multinational companies have initiated mergers and acquisitions, the rest of the industry watches and waits for the ripple effect.
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First, it was Monsanto that pursued Syngenta with two offers for a merger in 2015. As rumours and speculation swept through the agribusiness and farming communities about what a deal like this could mean for the industry, DuPont and Dow stole the spotlight in December by announcing a merger agreement between the two U.S. chemical and agribusiness giants._x000D_
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Then in February, Syngenta agreed to be acquired by ChemChina, formally known as China National Chemical Corp., for $43 billion cash — the most ambitious overseas acquisition by a Chinese company. While the Chinese government appears to be in full favour of the deal, North Americans have differing reactions._x000D_
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Many in the United States have expressed concerns about national security, access to technology and the independence or interdependence of a Chinese-state owned company competing as it relates to trait approvals._x000D_
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“I … continue to be extremely concerned about the way in which biotechnology and innovation is being treated and impeded by a system in China that often times is not based on sound science and appears to be based more on politics,” says Tom Vilsack, U.S. Secretary of Agriculture._x000D_
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But Eric Johnson, a University of Saskatchewan weed scientist and former Agriculture Canada weed biologist, disagrees. He explains that a Syngenta-ChemChina deal is better than a Syngenta-Monsanto one._x000D_
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“[With the Monsanto offer], it’s possible you would be down to three really big companies and that could conceivably reduce competition,” he says._x000D_
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Regardless, Syngenta and ChemChina leaders maintain that Syngenta will continue to operate as a stand-alone company based out of Switzerland, and that existing management will stay to run the company._x000D_
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Now, it’s all eyes on Bayer’s $62 billion quest for Monsanto, but the St. Louis-based company rejected the offer saying the price is too low. At the time of print, talks between the two companies continue. Again the agricultural and farm communities are watching and waiting to see if the “big six” (BASF, Bayer, Dow, DuPont, Monsanto and Syngenta) become four or even three._x000D_
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Consolidation is inevitable with the cost of research and the need for return, says Bill Goodbar, president of the Goodbar Group._x000D_
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“That’s going to be the driving force,” he says. “Monsanto proved you can make good money off traits, but it’s getting harder and more competitive. The auto industry went through it and so did the pharmaceutical industry. It’s big money with big research and development budgets and expenses.”_x000D_
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A Changed Businesss Environment_x000D_
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Dean Cavey, managing partner at Verdant Partners LLC, attributes the current business development environment to decreased commodity prices and the need to diversify product offerings._x000D_
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“There are two things that have thrust this subject into the spotlight,” Cavey says. “The first is that commodity prices have decreased to levels that make it difficult to justify a continued high level of research related to seeds and traits._x000D_
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“The second is larger companies are looking to expand their footprint in the global agricultural markets.”_x000D_
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All the major players are looking at new and better ways to compete. But just how will these newly combined companies, assuming they all make it through the review process, impact the marketplace? And what will the impact be to others in the industry?_x000D_
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That’s the big question. It’s a “wait-and-see” approach in terms of just when the ripple will make its way through the industry and exactly what it will bring._x000D_
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Cavey doesn’t expect any changes at the top to make an impact in the near term. “If there are any changes, it will be in the long-term,” he says. “These mid- and smaller-size companies have been incredibly resilient, in spite of rapid consolidation, and I don’t expect that to change any time soon.”
