Environmental groups fear the potential health effects and impact on ecosystems of genetically modified seeds and criticize Monsanto’s dominant market position, which they argue affords the U.S. firm a stranglehold on farmers.
Advertisement
That’s because the deal combines two of the six US and European companies that dominate in agrochemicals.
Macquarie Securities in NY said the merger will create a structure that will help farmers optimize crop yields.
Described as “hellish marriage” by some, the prospect of this union of Bayer, whose pesticide called “killer bees” are also controversial, and Monsanto has raised many critics in Germany, a country where opposition to GM is fierce.
Bayer makes several brands of crop protection chemicals used to kill weeds, insects and fungal diseases, including Liberty herbicides and Movento brand insecticides.
“Bayer has a world class crop chemical business”, Fraley said.
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.
“In the short term there are not going to be dramatic differences for farmers”, says Phil Howard of Michigan State University, who has studied consolidation in the agricultural arena. They’re not accepted in Europe due to health concerns, so Monsanto sells little in Bayer’s backyard. It also makes Claritin allergy medicine, Coppertone sunscreen and One-A-Day vitamins. “This represents a major step forward for our Crop Science business and reinforces Bayer’s leadership position as a global innovation driven Life Science company with leadership positions in its core segments, delivering substantial value to shareholders, our customers, employees, and society at large”, Bayer CEO Werner Baumann said in a statement.
The companies said the deal, the largest German takeover of a United States firm, would help them save $US1.5 billion through cost-cutting, added purchase power and other “synergies” within three years.
Under its final, sweetened bid, Bayer also offered to pay Monsanto a $2-billion break fee in case the merger is rejected by U.S. or European authorities.
Monsanto’s current headquarters, in St. Louis, will become the companies’ commercial headquarters for North America, though it’s unclear how the mega-deal could affect jobs there.
He also said there was uncertainty over what the combined company would look like as regulators might demand asset sales.
A Monsanto spokeswoman said it was too early to say how Canadian operations might be affected by the deal. This is the world’s largest all-cash deal on record and is expected to close by the end of 2017. Monsanto plans a shareholder vote on the deal in a few months.
Advertisement
But Bayer said that it expects synergy savings from the merger will allow it to add $1.5 billion to its underlying profit as measured by EBITDA within three years.
