Deals

Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

While its biggest rivals compete for deals, insecticide maker FMC Corp. is biding its time.

You'd think its digestible $6.4 billion market value would make it an easy target at a time when just about everyone in the industry is drawing interest. (Quick recap: Dow and DuPont are merging, ChemChina is buying Syngenta and Monsanto, Bayer and BASF all seem to be holding deal talks of one sort or another.) But FMC's name hasn't come up much.

Sprouting Up
Deal activity among agricultural-chemical companies has exploded this year on the back of blockbuster bids for Monsanto and Syngenta.
Source: Bloomberg

There's a reason for that: The company's limited R&D pipeline and relative lack of blockbuster products make it a less-than-ideal strategic fit for the industry's giants. Also, FMC isn't just an agricultural company; its health and nutrition business makes coatings for drugs and chemicals that help give food texture, and its lithium division serves the electric-car industry. That makes it a tougher sell for a suitor that's primarily looking to bulk up in agriculture.

But life as a stand-alone isn't so bad for FMC. The company's niche focus on things like sunflowers, coffee plants and fruit trees -- as opposed to the more crowded fields of corn and soybeans -- has allowed it to find success without butting heads with the big guys, says Edward Jones analyst Matt Arnold. There's no reason it can't just keep doing that while the industry's giants work to integrate their businesses and find ways to sell seeds and chemicals alongside each other. Longer term, the growth prospects for all three of FMC's businesses look solid.

Fertilized
Analysts are forecasting steady sales growth at FMC over the next few years.
Source: Bloomberg

And FMC may yet join in on the next round of dealmaking -- but as an acquirer. The company is in a uniquely strong position to pick up whatever assets or products regulators might force consolidating companies to divest. Another would-be buyer, Platform Specialty Products, is saddled with a significant debt load. Meanwhile, Dow and DuPont or Syngenta and ChemChina probably couldn't bid on anything that Bayer-Monsanto or Monsanto-BASF might have to divest if they're trying to sell units of their own -- and vice-versa.

The products that end up getting sold may be too small or niche for many of the larger companies anyway. But for FMC, buying them would fit perfectly with its business model of gobbling up ingredients other companies no longer have use for and finding applications for them. Fungicides in particular are an area where FMC could stand to bulk up, says Bloomberg Intelligence's Christopher Perrella.

The company has already shown a willingness to pounce. CEO Pierre Brondeau closed on a $1.8 billion purchase of pesticide maker Cheminova in 2015 and then further deepened its focus on agricultural chemicals by selling the company's soda-ash business that same year. It's not likely to write another massive check right now but bolt-on opportunities would be right up its alley. Back when Monsanto was just kicking off this deal frenzy with its (ultimately failed) pursuit of Syngenta, Brondeau indicated a strong interest in picking up assets the companies divested.

Asked in May what FMC's current position was on M&A, CFO Paul Graves said, ``We'll sit, we'll wait, we'll see." That crouching tiger approach should serve him well. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Brooke Sutherland in New York at bsutherland7@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net