Since Syngenta chose to take Monsanto’s private buyout offer public, Monsanto now counters by talking to shareholders and the farm media.
I recently spoke with Mike Frank, Monsanto’s global operations lead, who stated their case for the value of this Syngenta buyout. “At the highest level, the whole motivation for this deal centers around innovation and how this combined company can help farmers in the future with new products and new tools to be more productive.”
In order to double food production by 2050 given limited land, water and ever changing climate, Monsanto believes that mergers are crucial because “our industry doesn’t have enough resources and scale to reach all the underserved farmers and underserved products around the world with products, services and tools to improve productivity,” Frank said.
Crop protection and biologicals. Monsanto’s most recent past in R&D has been primarily focused around seed, but more recently on biologicals and data science precision tools. While the company has had good crop protection business with Roundup and some acetanilide chemistry, they understand the added value that Syngenta’s portfolio and potential R&D synergy can bring into a combined company.
“We believe that we can accelerate and bring scale to innovation that combines seed traits and crop protection together in a way that we haven’t been able to do before – helping farmers become more productive and deal with climate change.”
The knowledge base into the biology of weeds, diseases and insects has intensified in the last 20 years, leading to initial discoveries with biological controls. Monsanto envisions accelerated biological/chemical/microbial innovations in the future.
Precision data science. The final piece that excites Monsanto regarding this combined company deals with precision tools. “When you look at our investment in Climate Corp and data science, such technology is going to be the integrator of farm inputs in the future. By combining our efforts, we will be able to build decision tools to help farmers make very precise decisions on what seeds and traits to use, what crop protection products to use or not use, when to use them, what rates, where in the field – using everything more precisely,” Frank said. “With combined efforts we will have the ability to bring all these tools in an accelerated and seamless way to farmers.”
Loss of competition? Given such possibilities, Monsanto says they understand farmer concerns about potential loss of competition and choice in the marketplace. “The regulatory process will ensure that the appropriate assets will be in the hands of good owners. We have said from the outset that we would sell all of Syngenta’s seed business to a qualified buyer, so farmers will continue to be able to buy those products in the future,” Frank said. “We will do the same with overlapping chemistries, so farmers would still have the choices they have today.”
Granted, whenever two industry giants combine forces, it will cause other large rivals to reconsider their strategy and review cross-licensing deals. In fact, in a recent Bloomberg report, Liam Condon, Bayer AG’s head of their CropScience unit, stated that “There’s only six research and development based players in this industry so if the two biggest were to go together, inevitably it would force others to review their strategies.” (Read more here.)
Monsanto doesn’t view large industry consolidation as less competition for farmers. “Our industry needs to scale up to invest in R&D at a level that will deliver more innovation to farmers. That is the future of agriculture,” Frank said.
He compared a possible shrinking crop protection/seed biotech industry with the tractor industry. “You may debate whether there are two or three major tractor manufacturers, but there’s a reason there isn’t six major companies. If there were six, then no one would have the size and scale necessary to offer new technology and tools to farmers.”
Frank admits there has been a lot of innovation in the past 30 years, “but we must accelerate it if we’re really going to put tools in the farmers hands that will allow them to double production in the next 35 years.
“The reality is that products that are valued today, their value doesn't go away. The only way that farmers choose to do something different than they are today is someone brings them new value. Competition is robust today, and it is going to continue to be. In fact I think, the more consolidation, the more robust the competition becomes, because it then truly is about innovation, and farmers will win. And society will win.”
Licensing strategies? Since the seed biotech business is full of companies that license technology to each other, Frank doesn’t see that changing. “We’ve been leaders in our industry in terms of what we call open architecture, so as we innovate, we broadly license our technologies to the rest of the industry. We think that is good for farmers because it gives them more choices. This new company will remain committed to a broad licensing approach.”
Next steps. Monsanto will continue talking to farmers and Syngenta shareowners to help them understand the strategic rationale and the value of the offer. “We want them to know how we think it makes a lot of sense for agriculture, and what our vision is for this new company that they will be invested in. When thinking long term, like farmers do, they will understand that this makes sense for them as well. Then it will be up to us to innovate, and we believe this gives us the best chance to innovate. And farmers will only reward us if we innovate,” Frank said.