NEW YORK (TheStreet) -- It hasn't been a great year for Monsanto (MON), which reports fiscal third-quarter earnings results Wednesday before the opening bell. But if the company is not careful, "bad" can turn to worst real quick, especially when money is poorly spent.
With shares down more than 4% on the year and down more than 6% in the past 12 months, the St. Louis-based company is looking to spend billions in M&A to ensure its long-term prosperity. Its top target is Swiss-based competitor Syngenta AG (SYT), which Monsanto offered to buy for $45 billion, which is a 43% premium to Syngenta’s closing price on April 30, prior the bid being made public.
The question is how much sense does a deal make today, especially when acquiring Syngenta doesn't guarantee the boost in revenue and profits that is commensurate to the premium Monsanto seems willing to pay. Monsanto seems to operate on the idea that "doing something is better than doing nothing."
Granted, Monsanto, the world's largest seed producer, owning some 27% market share in all seeds used in modern agricultural farming, is struggling to grow revenue and profits. Some of Monsanto's largest segments, including its corn seed business are under pressure due to (among other things) weak acreage, which is the amount of land devoted to planting.
Complicating matters, Monsanto's agriculture business, which includes the herbicide Roundup, once an offsetting business that helped to temper weak seed sales, has experienced double-digit sales declines of its own.