One of the world’s biggest agriculture conglomerates is set to be created, with the announcement that German chemical company Bayer will purchase U.S. seed company Monsanto in an $88 billion deal that could change the future of global food supply.
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The combined entity will control almost a quarter of the global market for seeds and crop chemicals. Bayer and Monsanto would be two of the remaining agribusiness giants to merge, and regulators are likely to scrutinize whether the deal could raise prices that farmers pay for seeds and chemicals.
To assuage Monsanto’s concerns, Bayer threw in a $2 billion breakup fee if the deal fell apart on antitrust grounds.
Announcing the agreement, negotiations for which began in May 2016, Hugh Grant, chairman and chief executive officer of Monsanto, said the combined might of the two companies would deliver solutions for a new era in agriculture.
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.
Bayer paid a 44 percent premium to Monsanto shareholders.
That was also the idea behind Monsanto’s swoop on Syngenta past year, which the Swiss company fended off, only to agree later to a takeover by China’s state-owned Chem-China.
American industrial giants Dow Chemical and DuPont pioneer struck a merger in December last year, and Swiss-based chemical and seed company Syngenta agreed to a takeover by Chinese industrial giant ChemChina in February this year. According to Reuters, this is the largest all-cash takeover deal ever recorded.
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The European competition regulators said publicly before a deal was even signed that they would look at how the combination could affect prices and the availability of seed products as well as research.
