Monsanto Says It No Longer Sees Large-Scale M&A as Strategy

  • Future deals will be collaborations, small acquisitions
  • `Integrated solution' for farms to be built product by product

After years of pursuit with three separate failed offers to buy Swiss pesticide-maker Syngenta AG, Monsanto Co. said it no longer sees "large-scale" mergers and acquisitions as a strategy, signaling the end of any lingering ambition to bid for another major crop-chemicals or seeds business.

Speaking Wednesday on the St. Louis-based company’s second-quarter earnings call, Chief Executive Officer Hugh Grant said Monsanto will use licensing, partnerships and small acquisitions to reach its vision of a fully-integrated solution for farms, which will encompass seed, crop protection, nutrition and digital, data-driven precision management products.

“There’s an opportunity in bringing chemistry and biology together on that acre, and using data science as the glue that holds that together,” he said. “We are better placed than our competitors to integrate those three pieces together.”

Monsanto on Wednesday posted its smallest fiscal second-quarter profit and sales since 2011 as a global slump in farm commodities depressed demand. The rout for crop prices has spurred a wave of consolidation in the seed and crop-chemical industry. China National Chemical Corp. said in February that it reached a deal to buy Syngenta, the biggest deal so far. Dow Chemical Co. and DuPont Co. announced in December they would merge before breaking into three separate entities, including a Monsanto-sized agriculture company.

Grant said creating products that boost yields will determine winners in the sector, rather than deals that find cost synergies, as farmers are seeking the best technologies even in a tough environment of low crop prices and falling incomes. While a Syngenta acquisition would have accelerated the process, the company’s strategy wasn’t dependent on it, and growth will be driven on a product-by-product basis. The company’s ability to develop new products, with its field testing infrastructure and knowledge of plant genomics, combined with its commercial reach, can attract collaborators, he said.

“We believe the industry will continue to rationalize, focusing investment to the higher-return options,” Grant said. This will mean more research and development, or “commercial partnerships for which we are uniquely positioned to participate and no longer see large-scale M&A as a likely opportunity,” he said.

Monsanto was exploring potential deals with BASF SE and Bayer AG, people with knowledge of the matter said in March. Monsanto’s unsolicited $43.6 billion proposal to acquire Syngenta AG, the world’s largest pesticide producer, was rejected by the Swiss company in August.

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