Monsanto puts mergers, purchases on back burner

CHICAGO, Ill. (Reuters) — Monsanto has pulled itself out of the mergers and acquisitions flurry in the seeds and agrochemicals industry, nearly a year after making a bid for Syngenta.

The company, which also reported a drop in second quarter earnings, now sees its best deal-making opportunities in smaller acquisitions, licensing deals and partnerships, said chief executive officer Hugh Grant.

“We now see this (industry rationalization) translating into further R&D (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,” Grant said.

Monsanto’s move for Syngenta triggered a period of heightened M&A activity in the industry, which six large companies have long dominated.

Syngenta agreed to be acquired by ChemChina for $43 billion in February, while Dow Chemical and DuPont struck a $130 billion merger last year.

Low crop prices and belt tightening by farmers have pressured prices and prompted companies to consider acquisitions.

Monsanto, the world’s largest seed company, continued to tout itself as the industry’s “partner of choice.”

After its bid for Syngenta failed, the company approached Bayer AG and expressed interest in its crop science unit, including a potential acquisition worth more than $30 billion.

Farmers in the United States have been spending less on crop inputs as grain prices hover near five-year lows and incomes have fallen to their lowest since 2002. This has forced Monsanto and DuPont Pioneer to offer the steepest discounts in at least six years.

“Monsanto every year has a lineup of new products that allows them to charge more than the prior year. This is an environment where that’s a little tougher of a conversation to have,” said Matt Arnold, materials analyst with Edward Jones.

Net income attributable to the company fell to $1.06 billion, or $2.41 per share, in the quarter ended Feb. 29, from $1.43 billion, or $2.92 per share, a year earlier. Earnings on an ongoing basis were $2.42 per share.

Monsanto reiterated its ongoing 2016 earning per share guidance of $4.40 to $5.10 after lowering the outlook last month amid currency headwinds and heightened pricing competition,

Net sales fell 12.8 percent to $4.53 billion.

Analysts had expected a profit of $2.44 on revenue of $4.76 billion, according to Thomson Reuters.


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