By: Matthew Campbell and Sheenagh Matthews
The board of Syngenta AG is reluctant to embrace Monsanto Co.’s $45 billion takeover bid. Environmentalists and regulators may be even harder to convince.
Food-policy activists on both sides of the Atlantic are gearing up to oppose a deal that would strengthen Monsanto in Europe and cement its dominance in the U.S. They argue a bigger Monsanto could squeeze farmers, reduce genetic diversity in agriculture, and make it harder for governments to control genetically modified organisms.
Resistance from non-governmental groups could create significant political obstacles to any Monsanto takeover, which will also likely face an antitrust review. The transaction may unite food-conscious consumers -- people who buy organic produce and shun what they perceive as inferior conventional food -- with some farmers concerned about giving too much power to a single corporation.
“From a public health and environmental perspective this is a complete disaster,” said Bill Freese, a science policy analyst at the Center for Food Safety, an advocacy group in Washington. “The more I look at this, the more it worries me and the more it needs to be opposed.”
Syngenta, the world’s largest producer of crop chemicals including pesticides, on May 8 officially rejected a takeover offer from Monsanto valued at 449 Swiss francs a share, or 41.7 billion francs ($45.1 billion). The U.S. company, the world’s largest producer of GMOs, said in a response to the rejection that a combination would “deliver significant value.”
Monsanto is currently weighing an increased offer, according to people familiar with the situation. It declined to comment on a potential higher bid and opposition to a deal. Syngenta’s representatives couldn’t immediately be reached.
Though regulatory reviews of deals are an ostensibly technocratic process, public opinion almost always comes into play. After regulatory opposition last month killed Comcast Corp.’s proposed $68 billion acquisition of Time Warner Cable Inc., cable-industry association head Michael Powell said the sector’s reputation was hurting it in policy discussions.
Monsanto faces reputational challenges, Syngenta deal or not. In pollster Harris Interactive’s latest study of public perceptions of the 100 most prominent U.S. companies, Monsanto ranked 97th. Last year Modern Farmer magazine, a title beloved by fair-trade foodies from Williamsburg to West Hollywood, ran a feature entitled “Why Does Everyone Hate Monsanto?”
“We’re not in favor of an even more concentrated market,” Marco Contiero, the policy director for agriculture at Greenpeace Europe in Brussels, said of the proposed takeover. “It doesn’t give small producers a chance.”
A top concern is crop diversity: a larger company would eventually mean fewer varieties of seeds available to farmers, say opponents such as Freese. Another is that the combined company could spur increased use of herbicides by combining Syngenta’s stable of weed killers with Monsanto’s marketing heft and crop development expertise.
“Two really big seed companies becoming one big seed company means even less choice” for farmers, said Patty Lovera, assistant director of Food & Water Watch, a policy group in Washington.
GMOs are likely to be a particular flashpoint in Europe. Proponents of GMOs argue they can produce greater yields and incorporate useful characteristics like resistance to insects, reducing the need for chemical pesticides, all without health risks greater than those of other breeding techniques.
Monsanto has been one of the foremost advocates of the technology. Its scientists were among the pioneers of genetic modification of plant cells in the early 1990s, and it has lobbied vigorously for their use.
European policymakers, though, haven’t been swayed. GMOs are largely banned in the European Union due to what activists say are uncertain effects on health and the environment. In 2012, Germany’s BASF SE -- fed up with public hostility to GM crops -- halted research on them in Europe and moved remaining operations to the U.S., where they are in wide use.
Even there, some businesses are betting that consumers would rather avoid them. Chipotle Mexican Grill Inc. this year said it would stop using GMOs -- a decision the burrito chain trumpeted in its marketing.
Syngenta executives chose to subtly highlight Monsanto’s reputational issues in rejecting its bid. Monsanto’s proposal, Syngenta wrote, would face “significant execution risks, including regulatory and public scrutiny at multiple levels in many countries.”
Ironically, a deal with Syngenta, which has been less publicly enthusiastic about GMOs, could offer Monsanto a reputational boost, said Jeremy Redenius, an analyst at brokerage Bernstein. Despite bad press around some of its products and the documented health impact of pesticides, the Swiss company has a less negative profile, Redenius said.
A deal would give Monsanto a range of less controversial products, and “they could perhaps drop the Monsanto name” after the transaction, Redenius said. “I don’t know if they would take Syngenta’s, but it’s an opportunity.”
Originally Published: Bloomberg Business