American seed and weed-killer company Monsanto and German medicine and farm chemical maker Bayer are combining in a deal that could help farmers produce higher yields to address challenges from global warming to rising food demand from a fast-growing global population.
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The National Farmers Union in the United States said the Bayer deal, along with other pending agricultural mergers, “are being made to benefit the corporate boardrooms at the expense of family farmers, ranchers, consumers and rural economies”. “They (farmers) are getting very low prices for the huge amount of crop rolling in”.
Based on Monsanto’s closing share price on May 9, 2016, the day before Bayer’s first written proposal to Monsanto, the offer represents a premium of 44% to that price.
Sluggish global economy, lower investments in agricultural inputs, volatile weather patterns and sturdy competition in grain exports have been putting pressure on Monsanto. Fitch Ratings noted the combined Bayer would have a 25 percent share in some markets, “almost certainly drawing regulatory scrutiny and posing antitrust obstacles”. The U.S. seed behemoth asserted that Bayer’s grouping would unlock the next tranche of opportunities and growth for its business.
“It will. create an innovation engine for the next generation of farming”, Monsanto CEO Hugh Grant said. Together with the effects of warmer temperatures, more-severe storms, less land available for farming and the need to reduce pollution and greenhouse gas emissions from farming operations, that is pressuring farmers to be more productive. Areas of potential overlap include some soybeans, canola and cotton seeds. The company also makes a variety of products to protect crops from pests, disease and weeds; its Roundup line is the world’s best-selling weed killer. They’re not accepted in Europe due to health concerns, so Monsanto sells little in Bayer’s backyard. After Bayer and Monsanto tie up, creating a leader with $26 billion in combined revenue from agriculture, that number will shrink to just four.
“Because there is minimal overlap between the two companies…we feel confident we can conclude this transaction in the proposed time frame”, Grant said. He said the deal “represented the most compelling value for our shareholders”.
A press release from Bayer says Monsanto’s Board of Directors, Bayer’s Board of Management and Bayer’s Supervisory Board unanimously approved the agreement.
The German pharmaceutical and chemical giant Bayer says it will buy U.S. seed seller Monsanto for $66 billion in an all-cash deal that will create the world’s largest supplier of seeds and agricultural chemicals.Bayer has been courting Monsanto for months, and recently raised its bid for the St. Louis-based company from $125 a share, to $127.50 a share, with the companies finally settling on a price of $128 a share. The combination also brings together both companies’ leading innovation capabilities and R&D technology platforms, with an annual pro-forma R&D budget of approximately Euro 2.5 billion. This week, two mergers worth billions are moving forward. The transaction is slated to close by the end of 2017.
“Apart from Monsanto’s shareholders, who have hit the jackpot, this looks like a lose-lose bid”.
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Shares of Bayer were sliding in mid-morning trading on Thursday.
