Over the last two decades Monsanto has cast off its century-long history as a chemical company and refashioned itself as an agricultural life sciences company, led by its genetically engineered seeds.
But with its $45 billion bid to acquire the agricultural chemical giant Syngenta — a bid Syngenta rejected on Friday as inadequate — Monsanto appears to be trying to get back into a business it largely abandoned. That is a possible acknowledgment, some analysts say, that the biotech seeds might not be the engine to carry the company forward much longer.
“If you go back 10 years, they put all their marbles on biotechnology and they’ve done fantastically well there,” said William R. Young, managing director of ChemSpeak, a consulting firm following the chemical industry. “But going forward, maybe the growth is limited,” he said. Buying Syngenta “allows for some diversification in product line.”
Syngenta both announced and rejected Monsanto’s unsolicited bid on Friday, saying the offer undervalued Syngenta’s prospects and underestimated “the significant execution risks, including regulatory and public scrutiny at multiple levels in many countries.”
Monsanto offered to pay 449 Swiss francs, or about $490, for each share of Syngenta; 45 percent of the payment would be in cash. The offer represented a 35 percent premium to Syngenta’s closing price on Thursday.Monsanto, in its own statement, said it believed combining the two companies would create “an integrated global leader in agriculture with comprehensive and complementary product portfolios.” It said it was confident in its ability to obtain all necessary regulatory approvals.
The deal would create an agricultural behemoth, combining Monsanto, the world leader in seeds and genetically engineered traits (like herbicide resistance), with Syngenta, the largest producer of agricultural chemicals.
The two companies are in some sense mirror images of each other. They are similar in size, each with over $15 billion in annual revenue. But Monsanto gets most of its revenue from seeds and biotech traits; the rest comes mainly from the herbicide Roundup. Syngenta gets most of its revenue from chemicals, like weed control products, and less from seeds.
So far, investors have seen more potential in the seed business. Monsanto has had a market valuation more than 60 percent greater than Syngenta’s.