However, US regulators approved another merger in this area last month that suggests Bayer’s buy of Monsanto will happen, as the China National Chemical Corporation (SSE: 601117) earned approval for its $43 billion purchase of the Swiss chemical and seed company Syngenta, which rejected a takeover bid by Monsanto a year ago. Monsanto shares closed Wednesday at $106.76, well below Bayer’s offer to pay $128 a share. It’s not a done deal, however, as the merger must be approved by Monsanto shareholders and European Union and US regulators.
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Antitrust officials around the world who are already grappling with a wave of consolidation across agriculture will be forced to sort through a new layer of complexity now that Bayer AG has clinched a deal to buy Monsanto Co.to create a seed and crop-chemical giant.
Bayer and Monsanto executives wouldn’t discuss the fate of the Monsanto name, but said the combined company’s seeds and North American business will have headquarters at Monsanto’s St. Louis base.
A National Academies of Sciences panel of experts said in May that there was no “substantiated” evidence that genetically engineered crops had triggered human health concerns or hurt the environment, though they added that more research was needed. He said regulators should block the merger. Bayer’s offer includes a fee of $2 billion should the transaction fail to get regulatory clearance, a process the market appears to view as uncertain. Monsanto’s board of directors, Bayer’s board of management and Bayer’s supervisory board have unanimously approved the agreement.
“Market forces led to deals like the one announced today, but we know that major-company mergers have a profound impact on the tools available to farmers and ranchers, sometimes to their detriment.”, said Bob Young, chief economist with American Farm Bureau Federation, in a media statement.
The move will take place over the next two to three years.
Now that a deal has been announced, Bayer will likely face the brunt of the protests and political pressure about its new business model, analysts and investors say. Yet many are doubtful about the company’s claim that the combined businesses “are expected to result in significant and lasting benefit for farmers: from improved sourcing and increased convenience to higher yield, better environmental protection and sustainability”.
The deal is pending regulatory approval, and given the size of the deal and the recent run of regulators scuttling megadeals, this isn’t a slam-dunk payday for these investment banks just yet. “Together Monsanto and Bayer will build on our proud tradition and respective track records of innovation in the agriculture industry, delivering a more comprehensive and broader set of solutions to growers”, said Grant.
Rivals in the global agricultural sector are also merging.
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In crop chemicals like herbicides, the companies created by the Syngenta-ChemChina and Bayer-Monsanto mergers would control more than half the market, according to 2015 data compiled by Bloomberg.
