God, I am getting old. I was just reading about the possible takeover of Syngenta by Monsanto…both companies have investment firms investigating the options of the merger that would create one large ag chemical and seed company with combined sales of $40 billion annually. Gee, that sounds like a pretty big operation.
I’ve always admitted I am no businessperson. But I’ve been around long enough to understand the concept of economies of scale. I’ve heard the business philosophy that if you don’t keep growing you are falling behind. I understand that. You have two shoe stores on opposite sides of the street, both are struggling, you put them together to make one larger store that does well. One farmer buys his neighbor’s place and now he can afford to buy a seed drill and combine that can service the bigger parcel of land — that all makes sense.
But in today’s corporate world you have big companies buying big companies and for what? Monsanto has sales of about $15 billion annually and about 22,000 employees. Syngenta has sales of about $16 billion annually and about 28,000 employees. Both companies post profits in the $1 to $1.5 to $2 billion range annually. I don’t see a whole lot of struggling go on here.
So you merge these operations and create one behemoth company and for what? To have profits of $3 to $4 billion and 50,000 employees? One report suggested Monsanto was interested in the merger so it could enjoy the tax savings of having a headquarters in Switzerland. But I’m thinking they could probably set up a couple Atco trailers for a lot less and call that home. These big mergers aren’t new— seed and chemical companies, machinery manufacturers, grain companies, animal health companies, airlines, hotels, communication companies and others — have been working on this for years – but the deals seem to be getting bigger. Monsanto and Syngenta are just the most recent. But where does it end? So you create a new company called Mongenta or Synsanto and then in five years who is going to buy that? I once caught a small rainbow trout on the Fording River and before I could get it to shore it was nabbed by a larger bull trout and then I had two on the line. Maybe the corporate world mimics nature. I’ve always had this lingering sense that one day Walmart will own the whole world, and then turn to size up a bid on the moon.
I can only assume on some level it makes good business sense, or at least it will give some board chairman a new level of bragging rights. Does it better serve the industry, help farmers with food production, benefit society as a whole? I have to wonder about that — we need some clever mind like Warren Buffett or Bill Gates or Alberta’s new premier Rachel Notely working on that puzzle.
In the meantime, it is a probably a good day to take the pop cans to the recycler and then buy a Big Mac for lunch before a corporate wave takes poor old McDonalds and it’s 32,000 restaurants off the map. These little fish appear to be vulnerable.
Lee Hart is a field editor for Grainews in Calgary, Contact him at 403-592-1964 or by email at [email protected]