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Monsanto and Syngenta: Is there any Geographical Synergy?

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Monsanto and Syngenta’s global presence

Monsanto (MON) is the world’s leading seed company and has a presence across the world. In fiscal 2014, MON generated 61% of its revenues from North America, followed by 12% from the EMEA (Europe, the Middle East, and Africa) region, 5% from Asia, and the remaining 22% from the rest of the world. On the other hand, Syngenta (SYT) has a relatively larger presence in the EMEA region, with a total revenue contribution of around 30% in 2014, followed by 24% from North America, 13% from Asia, and remaining 33% from the rest of the world. Overall, Syngenta has a greater presence in emerging markets such as Asia than Monsanto.

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Geographical synergy

After the acquisition, Monsanto is expected to have a more balanced geographical presence than its individual global presence. Monsanto would generate around 42% from the domestic market of North America, followed by 21% from the EMEA region, 9% from Asia, and the remaining 27% from the rest of the world, assuming no divestment of businesses.

With a greater global presence and a strong agricultural product portfolio, Monsanto would have an opportunity to capture the growth in the high-growth region of Asia. The company would be in a better position to compete with the recently merged Dow Chemical (DOW) and DuPont (DD). The merged entity is the second biggest player in the global agriculture chemical sector.

With a stronger presence in Europe, as well as research & development activities, Monsanto would be able to compete better with big European peers such as BASF and Bayer. However, Monsanto would continue to generate around 60% of its revenue from international markets. Thus, the company’s earnings would remain sensitive to currency fluctuation.

The Materials Select Sector SPDR (XLB) ETF is the largest chemical ETF that tracks the performance of chemical players. DOW and DD form 22% of XLB’s total holdings.

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