Source: mergermarket limited via Checkbiotech

A number of seed companies are now considering a sale and see increased consolidation, industry executives said.

The climate for consolidation has heated up with publicly listed entities Monsanto and Syngenta competing over seed acquisitions, and fellow competitors Dow, DuPont and Bayer still planning to play a significant role in developing genetic traits for seed.

While Monsanto and Syngenta are at the forefront of the acquisition frenzy, industry executives have said Dow, DuPont and Bayer could also be interested in making acquisitions, according to previous reports on this news service.

Propelling consolidation are the huge multiples that Monsanto in particular, as well as rival Syngenta, have been willing to pay for local and regional seed companies, those industry executives said. lt was previously reported that Monsanto has paid multiples of three times revenue or more to buy seed companies.

Seed industry executives said that Monsanto and Syngenta are willing to pay huge multiples for seed companies to ensure they have a pipeline for the genetic traits they develop for seeds.

The fear for biotech companies such as Monsanto and Syngenta, industry executives have said, is that they will be frozen out of the market unless they acquire at least some seed companies.

Monsanto, Syngenta, DuPont, Dow and Bayer develop genetic traits for crop seeds through their biotechnology units, industry executives explained. They then license or sell the right to use these genetic traits to seed companies. The seed companies incorporate the genetic technology into the seed product they produce themselves, and then sell this seed to farmers whom they have cultivated as clients.

The genetic traits can provide a variety of beneficial attributes, including pest and drought resistance, and can magnify a crop's pre-existing beneficial properties. At one time, the biotech companies were content to develop the genetic traits and simply license the technologies, making a great deal of money, in some cases roughly USD 100 per bag, executives said. But over the last decade or so, they have acquired the seed companies they licensed their technologies to, industry executives said.

Once one company began to directly acquire the seed companies to whom all the biotech companies licensed their genetic traits, other companies felt a need to acquire their own companies. The fear is that, down the road, the seed company that was bought by a rival would only feature the parent company's seed trait, freezing out competing traits.

Some of these executives, however, concluded that while seed companies have to consider all options including a sale - and that there will be many companies eager to accept the high multiples offered - there will continue to be room for local and regional seed companies, despite the aggressive acquisition binge of Monsanto and Syngenta.

One industry executive said that, 10 years ago, many inside the industry were predicting rapid consolidation, with only a handful of players left. But the number of seed companies has remained fairly stable.

Another industry executive countered that seed companies who think they can remain independent are "living in a dream world." He said Monsanto and Syngenta will likely, in the long-term, begin to squeeze out smaller seed companies and then increase prices. He said most of the profitability and control has already gone to Monsanto and while the growth in sales is there for the independent seed companies, profit is down.

A spokesperson for Syngenta said the company is focused on integrating its previous acquisitions, but would not rule out future acquisitions, and said it does not comment on competitors. The spokesperson would only say that Syngenta buys seed companies at prices the market will bear, and its goal is to provide an integrated offering of not only genetic traits, but also the seed or germ plasm itself, crop protection and seed treatment.

A Monsanto spokesperson declined to comment on the company's business activities concerning mergers, acquisitions or divestitures, as well as on competitors' strategies.

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