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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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.
The companies expressed optimism that the takeover will pass regulatory review in the USA and overseas and said they hope to seal the deal by 2017.
At this stage, companies within the global seeds, traits and agricultural chemical industry are banking on the strategy of consolidation.
“Because there is minimal overlap between the two companies…we feel confident we can conclude this transaction in the proposed time frame”, Grant said.
Bayer boss Werner Baumann said the deal “reinforces Bayer’s leadership position as a global innovation driven life science company”. For example, a merger between DuPont and Dow Chemical that was agreed upon in December of a year ago is unlikely to close until early 2017 after the European Commission started an investigation.
In May, Bayer offered $62 billion to buy Monsanto, saying the pesticide and fertilizer producer was a ideal match for its agricultural business. However, skeptics still question whether the $130 per share deal will overcome regulatory hurdles.
Before everything is finalized, the deal will be subject to approval of Monsanto shareholders, as well as the Federal Trade Commission.
The companies also wouldn’t discuss possible job cuts.
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. If this deal goes through, basically, the combined company would own 30 percent of the global seed business.
All these partnerships are now seeking regulatory approvals from concerned authorities, whereas some are also seeking shareholders’ approval. He laments, “If you take six big companies and make them three, you’ve just made it simpler for them to hold prices higher and maximized their ability to make better margins at expense of farmers”.
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You know, visibly at the store or at the co-op – wherever they buy their products – it might not seem like anything changes because the same products will be on the market, but there will be fewer independent suppliers of, you know, the things that they need to produce their crops, the – you know, the pesticides and specifically the seeds. Monsanto shares have yet to open. Weaker agro-product prices are now weighing on farmers’ income, affecting their purchasing decisions. Combined, Bayer and Monsanto will have a research and development budget of about 2.5 billion euros, or $2.8 billion. “At the end of the day, whatever is going to happen is going to happen”.
