EUROPEAN-SEED.COM I EUROPEAN SEED I 23 bring a few of them together, you force them to sell off select assets that are really the crown jewels of their business, and that could actually be a benefit for other companies. We have seen a bit of this process in the past decade where after the acquisi- tion of Seminis by Monsanto, the vegeta- ble product portfolio was slimmed down from 62 to 25 crops and the germplasm of the discontinued vegetable species was auctioned off to other small and medium sized breeding companies, providing them with a very welcome injection of high value genetics. As it relates to the higher prices, it was not two people in two companies who decided that the big six is the wrong number and should become the big four. There are forces behind the scenes that are way more powerful than any one person’s desire to merge or acquire, and a lot of that has to do with shareholder demands, while not fully understanding that agriculture has cycles. For people in the industry, we understand that this is a period where we’re going to experi- ence less profitable times and we need to weather the storm and get through this. In terms of choices and how that relates to the farmer, I think that any- thing that is demanded in the market today, will continue to stay on the market. Maybe the only difference is that there will be a different name on the bag. The companies that comprise the big six have brought technology to the market and we give them a lot of credit, but the reality is that innovation has been done on a small scale by startups, by uni- versities, and these organizations are not going anywhere. They are not part of this merger and acquisition process. The very nature of the word inno- vation means that the products that are currently in the market will eventually be replaced by new products. Thus, I think there is going to be no lack of choices. In respect to price, the biggest hin- drance for increasing prices is the farm- ers’ profitability. I don’t think there is a lot of room to raise prices on the farm, because farmers simply cannot afford an increase in price. So all in all, the farmers, growers and producers of this world are fairly well insulated from these deals. I understand that there is concern, but I don’t think there needs to be a level con- cern from the reasoning of: fewer players means less varieties, means higher prices. ES: WHAT ARE THE BENEFITS FOR MONSANTO AND BAYER? GS: The end result of the transaction for these two companies will solidify them as the global leader in seeds and crop protection. Monsanto is currently the global leader in seed, and with Dow and DuPont coming together, that leadership position was going to be challenged. So the transaction with Bayer solidifies them in a leading position. At one time Monsanto was chasing down Syngenta, to bolster their posi- tion in seeds with crop protection. That didn’t happen, and several other events unfolded, where the company changed in a way from predator to prey. The Monsanto strategy, back then was to buy Syngenta, was to buy the entire business and sell the entire seeds section. They were only interested in the crop protec- tion side of Syngenta. Both Bayer and Monsanto have veg- etable and field crops, and it is almost a certainty that parts of both companies will need to be divested. For example, in North America, there is a decent amount of overlap in canola and cotton. And besides seeds, there’s the technol- ogy/trait side of things. Bayer owns the LibertyLink trait technology, and how does that survive in a mix with Monsanto that owns the RoundUp technology? So this transaction will create a considera- ble concentration of technology. Having said that, LibertyLink is a relatively small compared to RoundUp Ready in soybean and corn. However, this picture is a bit different in the canola market, where the share of LibertyLink is greater than RoundUp. It remains to be seen how Nunhems, Seminis and other vegetable parts in this transaction will come out. The initial indications are that there is a good degree of complementarity, meaning that in cer- tain crops or crop types one company is strong whereas the other company is weak, and in other crops and types it is vice versa. The vegetable seed market is quite different from field crops, where in one vegetable crop you can have different types, maturities, sizes, regional adap- tations and other specialties. And one needs to really look into this in a detailed manner to see if something really is an overlap. Antitrust authorities have sat down with seed industry experts to ana- lyze these specificities into detail. Bayer and Monsanto seem to be approaching the transaction in a con- servative way, and they are proactively and pre-emptively offering concessions to the regulators, by putting forth cer- tain assets, and in some cases even their crown jewels. For example, in North America, Bayer’s canola program is a fantastic program which would be highly desirable in the market place. So for Bayer to part with this program, is a huge concession, but obviously one they are willing to make to ensure this deals goes forward. There is so much more at stake than just the Canadian canola market. ES: WHAT ARE THE BENEFITS FOR SYNGENTA AND CHEMCHINA? GS: With this transaction, ChemChina is going to have access to seeds and traits and specialized crop protection products like they have never had before. National food security has to be high on their hit list of what they are chasing, so this is a very strategic acquisition for ChemChina. And for Syngenta the big benefit is that they won’t be acquired and parceled off, or harvested for the various compo- nents. The management teams, systems, and distribution networks, and so on stay in place and are not interrupted as is the case in the other two transactions. This deal with ChemChina will allow for more continuity with Syngenta, so they can hit the ground running. It will take some pressure off Syngenta to hit sales targets, and it will allow them to regroup and to strategically place themselves in the market. Besides, there is value in not making all the public disclosures that public companies must make, as you can keep thing a little tighter to the chest. Another benefit is the likely facil- itated access to the Chinese market to capitalize on the huge and growing Chinese population. It is very hard to get any good insights into the Chinese market, so there is no saying whether this will now open up China market for more biotech crops. ES: WHAT ARE THE BENEFITS FOR DUPONT & DOW? GS: Once the merger is complete, some- time in late 2018, the merged entity will be broken into three new and separate “It is selfish of certain special interest groups to oppose such methods when you have a billion people going to bed hungry?” - Garrett Stoerger