Syngenta deal 'could kick-start ag merger wave'

A takeover of Syngenta, the world's biggest agrichemicals producer, by top seeds group Monsanto could kick start a round of sector consolidation dragging in groups from Germany's BASF to Australia-based NuFarm, Credit Suisse said.

The bank said that if Syngenta, which has rejected a $45bn bid from Monsanto, is acquired, "this could move others [in the sector] to move as well", putting the spotlight on potential deals within other industry behemoths.

Credit Suisse highlighted German chemicals conglomerates BASF and Bayer, and US peers DuPont, the owner of the Pioneers seeds business, and Dow Chemical, all of which have substantial agriculture arms.

And with mergers likely requiring the sale of some businesses to satisfy antitrust concerns, "this could drive opportunities" for these companies - as well as for groups such as Platform Specialty Products Corp, the which bought Arysta for $3.5bn, and NuFarm - "to buy any forced assets sales".

FMC Corp could also be in the frame for purchases, although the US-based group has unveiled some reluctance for further deals after last month's $1.8bn purchase of Cheminova.

'Market share issues'

Credit Suisse rated as "low" the probability that Monsanto would be able to acquire Syngenta without making asset disposals, given that the groups are, in seeds, the world's top-ranked and third-ranked players respectively.

The Syngenta seed business as a whole might be worth more than $8bn, although Monsanto may well be able to keep some parts of it, in areas such as diversified field crops, without ringing anti-trust alarm bells.

Asset disposals would also be likely if any of the other sector giants beat Monsanto to a takeover, with Bayer and BASF the second and third biggest agrichemicals groups, respectively, behind Syngenta.

"Both would," if acquiring Syngenta, "likely have market share issues in crop chemicals, and therefore cast unlikely to swallow Syngenta whole," the bank said.

'Regulatory yellow flags'

As for the US giants, Dow Chemical "would likely have some ag chem regulatory concerns as well as there being some on overlap in insect resistance traits [in seeds] that would be an issue," although these factors could be overcome.

For DuPont, "while the regulatory hurdles might not be as big" as those for Dow in buying Syngenta, there would still be "some regulatory yellow flags that might need to be addressed".

These would surround most notably in seeds, where a combined DuPont-Syngenta business would have a market share "towards the high 30s+" percent.

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