As the global agricultural sector races to consolidate, Bayer AG’s $66 billion all-cash deal to acquire Monsanto Co will test growing political and consumer unease in the United States and overseas over the future of food production.
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In a statement, Bayer said on Wednesday that it was paying Monsanto shareholders $128 a share in cash.
After months of on-again, off-again negotiations, Bayer and Monsanto have agreed to a merger that will create a “leading innovation engine for the next generation of farmers”, officials of the two companies said during a press briefing.
That’s because the deal combines two of the six USA and European companies that dominate in agrochemicals. Those are standard after big mergers and implied in this one, given that 80 percent of the $1.5 billion in synergies the companies predict after three years will be cost cuts in administration, sales and marketing.
Bayer makes crop-protection chemicals, and Monsanto is known for its seeds business.
The deals would leave farmers facing a duopoly in seed (Bayer/Monsanto and Dow) and two big firms in chemicals (Syngenta and Bayer/Monsanto), she said. It is also good for our growers, because they have better choices to increase yields in a sustainable way.
Justice Department investigators have in recent years launched probes into “possible anti-competitive practices” in America’s Monsanto-led seed industry, though a formal investigation was closed in 2012 without pursuing charges.
Both Bayer and Monsanto have presence in India with the United States firm selling genetically modified (GM) cotton seeds in the country for more than a decade.
But the latest offer, which also includes a raised, $2 billion breakup fee in the event of antitrust objections, finally was enough to convince Monsanto’s board.
Senator Bernie Sanders, who recently ended a run for the Democratic presidential nomination, called the deal “a threat to all Americans”. The companies “have chosen to do a deal in the year of merging dangerously”. “The whole strategic rationale of the deal is built around encouraging more innovation”.
The companies said the deal, the largest German takeover of a U.S. firm, would help them save US$1.5 billion through cost-cutting, added purchase power and other “synergies” within three years.
The US$100 billion global market of seeds and pesticides has grown increasingly competitive, as farmers duel for crop and market share on a planet whose population is expected to grow more than 30 per cent by 2050, to 9.7 billion people.
“The overlaps are minimal”, Grant told reporters on a conference call.
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“In Europe, we have excellent seed business that doesn’t have bio technology”. “We believe that this combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration”.
