The German pharmaceutical and chemical giant Bayer says it will buy US seed seller Monsanto for $66 billion in an all-cash deal that will create the world’s largest supplier of seeds and agricultural chemicals.
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The all-cash deal will see Bayer acquire Monsanto at 128 USA dollars per share (97p). These three deals would put two-third of the global chemical and seed supply chain in the hands of only three large companies. The transaction brings together two different, but complementary businesses together under one umbrella.
Both companies offer services in “digital farming”, helping farmers use data from sensors in their fields and satellites to improve crop yields by choosing the best seeds and applying just the right amount of chemicals at the right time throughout the growing season.
As sources throughout the industry and beyond debate the impending merger and its impact, both Bayer and Monsanto asserted that the merger will create significant value with expected synergies from the companies to reach $1.5 billion United States dollars after three years.
Baumann said in the call that he had already “received encouraging feedback” from regulatory agencies. But John Colley, a professor at Warwick Business School, warned it may be too soon to celebrate the deal.
Hugh Grant, Monsanto’s chief executive, told reporters on Wednesday the companies will need to file in about 30 jurisdictions for the merger.
“I would have to say this: I think there will be some concern from the growers because of the consolidation”, said Craig Brown, a vice president of the National Cotton Council of America.
Bayer’s share of the USA cotton seed market sits at 38.5 percent, while Monsanto is 31.2 percent, according to data compiled by the Konkurrenz Group. Monsanto shares were up 1.6% ahead of the USA market open.
“Scepticism is mostly linked to antitrust fears”, suggested analysts at Morningstar.
Bayer initially offered $122 per share, only to be rebuffed by Monsanto management, and then $125 per share before reaching the deal announced Wednesday.
US government data show the companies had about 70 percent of USA cottonseed sales previous year, which means it’s nearly certainly an area they’ll have to address. The transaction includes a break-fee of $2 billion that Bayer will pay to Monsanto should it fail to get regulatory clearance.
We are on the verge of the largest all-cash deal, with Monsanto Company MON expected to collaborate with Bayer AG BAYRY. Bayer will also be taking on about $10 billion in debt.
The merged firm “will play a defining role in deciding which seeds and pesticides come onto the market”, warned Greenpeace agriculture expert Dirk Zimmermann.
In Europe, debate about glyphosate has reached Brussels, where European Union member states in July voted to restrict its use by the bloc’s farmers for 18 months.
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Bayer, which is strongest in Asia and Europe, is set to gain from Monsanto’s expertise in agriculture and seeds.
