Bayer has committed to a $2 billion reverse antitrust break fee if the deal falls apart and can not obtain necessary approvals. The German company is aiming to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.
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That was the idea behind Monsanto’s swoop on Syngenta AG past year. Dow Chemical and DuPont are planning a merger and ChemChina is purchasing Syngenta after the Swiss firm declined a takeover by Monsanto previous year.
Falling prices and crop surpluses in the US have driven farmers to buy less seed, herbicides, and pesticides, and might have motivated the deal.
German and USA competition regulators could reject the takeover due to the combined company’s size and control over the global seeds and insecticide sprays market. Shares of Monsanto and other agricultural companies “have been in the dumps along with the agricultural markets”, said Christopher Muir, an analyst with S&P Capital IQ.
Regulatory crackdowns have busted several high-profile mega-mergers this year, including a $150 billion deal between pharmaceutical giants Pfizer and Allergan.
Will worldwide regulators approve the deal?
“Antitrust cops are learning they’re cops”, Balto said.
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.
The deal, which is valued at $66 billion, including debt, must be approved by Monsanto shareholders and regulators.
Areas of potential overlap include some soybeans, canola and cotton seeds. Bayer had made two offers before this, which Monsanto had rejected. Brown said the council had taken no formal position on the proposed deal. The 20,000-employee company also develops Roundup, the weed-killing herbicide. “I’m more anxious about what it will mean for innovation in agriculture”.
Additionally, the industry has recently seen a lot of consolidation, meaning Bayer has to become a bigger player if it does not want to get left behind.
Bayer CropScience, a listed Indian entity, posted a turnover of Rs 3,818.60 crore last fiscal.
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The U.S. political landscape after the November federal election also will influence these ag-related deals. Representatives from the anti-poverty activist group Global Justice Now called the merger “a disaster for global food system”. “This would be the first major test of the new administration”.
