The $66 billion deal (including debt) that was announced by Bayer and Monsanto Wednesday morning could potentially create the world’s largest crop protection and seed company – if regulators approve.
Advertisement
The more farmers ditch those biotech seeds, the tougher it is for the likes of Monsanto to turn a profit. After issuing the standard, unsolicited bid response over the past few months, Monsanto finally has succumbed to Bayer.
Monsanto is the world’s largest supplier of genetically modified seeds and also makes herbicides, including Roundup. “Consumers must continue to have fair access to the best technologies and innovation”. In addition to health care, Bayer also has a crop sciences division, in which Monsanto would fit.
Bayer CropScience, the Indialisted subsidiary of Bayer AG, too has seeds business, though it is just around 12-15% of its total revenue.
It would be the biggest yet acquisition of 2016 once approved by regulators in the U.S., Germany and the European Union but the deal between the corporate giants that will hand over more than 25 percent of the world’s seeds and pesticides to Bayer is likely to be heavily scrutinized by government regulators across the globe.
“This deal between Monsanto and Bayer comes close on the heels of the proposed Dow-DuPont merger”, said Bob Young, chief economist with the American Farm Bureau Federation. Competition in an industry usually holds down prices.
Hugh Grant, Monsanto’s chief executive officer, told reporters the companies will need to file in about 30 jurisdictions. In addition, Bayer has committed to a United States dollars 2 billion reverse antitrust break fee. That would tilt Bayer heavily toward agriculture in a long-range bet on high-tech crops to sustain a growing global population.
“They were very aggressive, and really said, ‘This is science, and if you don’t understand science, you’re not smart and that’s a problem.’ That’s not a strategy that goes well”. “The whole strategic rationale of the deal is built around encouraging more innovation”.
Fraley said antitrust regulators will look at whether there is overlap between the two businesses, and whether it will thwart innovation. “They are in for a tough time”.
After a months-long pursuit, Bayer said its USA peer had accepted an improved offer of $128 per share for Monsanto in an all-cash transaction, avoiding the need to resort to a hostile takeover.
Advertisement
The companies claim that the combined efforts of Monsanto and Bayer will give its farming customers “new solutions, including agronomic insight”. Grant said on a Wednesday call that the merger would help the city become a “global centre” for the seed business, adding, “This is good news for St Louis”. With falling crop prices and a consistent quest to find more efficient manufacturing means, deals have been cropping up instead. This would be the fifth major deal in agriculture in the past year, he said citing the Syngenta/ChemChina acquisition and proposed mergers between Dow/DuPont, Potash Corp./Agrium and John Deere/Precision Planting LLC. But it faces the risk of government opposition at a time when regulators have not been shy in quashing transactions over antitrust concerns.
