Two chemical giants combine their ag divisions to form a billion-dollar company.
The once-trendy "life sciences company" moniker that Monsanto, Novartis and other chemical giants used as they attempted to build biotech and pharmaceutical powerhouses appears to be dying.
The downturn in agriculture combined with potentially risky biotech issues has caused Wall Street to downgrade stock prices. Or as Business Week put it, "gene" has become a four-letter word on Wall Street. In some cases, analysts have gone as far as to demand that companies like American Home Products and Monsanto split their ag and human drug divisions to capitalize on the growth in human drug sales.
Since stock price is the driver and sole judge of success in America, leave it to the Swiss, Brits and Swedes to make the first move. In early December, Novartis and AstraZeneca decided to split off their respective ag divisions and join them as "the first global, dedicated agribusiness company," called Syngenta, with combined global sales of $7.9 billion in crop protection chemicals and seed.
When approved in the second half of 2000, Novartis shareholders will hold 61% of the new company, with AstraZeneca re-ceiving the remaining 39%. The only agricultural components not included in this spinoff are Novartis's animal health business and AstraZeneca's 50% share of the global seed group Advanta (Garst, AgriPro, Interstate Seed and PSA Genetics), which it co-own with the Dutch company Cosun.
Syngenta, to be headquartered in Basel, Switzerland, is claimed to be number one globally in sales of crop protection chemicals and number three in seed, based on 1998 global sales.
Novartis and American Home Products (parent of Cyanamid) announced in 1999 their intent to divest their ag properties. Novartis's board was first to conclude that the benefits of concentrating on the health-care business outweigh the modest synergies between it and its agribusiness activities. It determined that merging its crop protection and seed business with AstraZeneca's agrochemicals "as the partner of choice is an exceptional solution for the long-term development of these activities."
Syngenta management expects the merger to provide a cost savings of $525 million per year. The company will downsize by 3,000 employees worldwide.