Daily Management Review

Move Made by Bayer for Monsanto Heralding Global Agrichemicals Shakeout


05/19/2016




Move Made by Bayer for Monsanto Heralding Global Agrichemicals Shakeout
As high inventories and low commodity prices spur consolidation in the global agrichemicals industry, German drug and chemicals giant Bayer AG has made an unsolicited takeover offer for Monsanto Co, the world's biggest seed company.
 
While the information about the deal was disclosed by Monsanto on Wednesday before Bayer confirmed its move, neither released proposed deal terms.
 
An acquisition of Monsanto would likely be bigger than ChemChina's February deal to buy Swiss agrichemicals firm Syngenta AG for $43 billion as the former is worth $42 billion by market capitalization. This could put the deal to face U.S. antitrust hurdles.
 
Subject to due diligence, regulatory approvals and other conditions, Monsanto said in a statement its board is reviewing the proposal. The statement however said that there is no assurance that any transaction will take place.
 
Bayer’s executives recently met executives of Monsanto to privately discuss a negotiated acquisition, said the company which has a market value of $90 billion.
 
Due to concerns about the security of U.S. food supply, there is intensive regulatory review in the United States for the Chinese state-backed ChemChina's deal for Syngenta and the Monsanto deal comes in this environment. As Beijing seeks to secure the country's own food supply the ChemChina's deal for Syngenta deal is the largest foreign acquisition ever by a Chinese company.
 
Antitrust experts said that due to the overlap in the seeds business, particularly in soybeans, cotton and canola, any deal between Bayer and Monsanto could raise U.S. antitrust concerns.
 
A tie-up might not receive antitrust clearance could also pose challenges for Monsanto it tries to spin a a deal with Bayer despite the concerns. Monsanto’s own bid for Syngenta last year would have meant significant expansion in seeds.
 
With a major life sciences business and the inventor of aspirin and maker of Yasmin birth control pills, Bayer is a much more diversified company than Syngenta or Monsanto. With Bayer’s businesses in seeds, crop protection and non-agricultural pest control, the company would potentially complement Monsanto's seeds assets.
 
With the aim to remain competitive, both Bayer and its German rival BASF SE have been looking to build scale in agrichemicals. But the role of Monsanto in any deal has been a sticking point.
 
Quoting sources Reuters had reported in March that Bayer had been approached by Monsanto earlier this year to express interest in the latter's crop science unit in the form of an acquisition or joint venture.
 
At an investor conference in New York earlier on Wednesday, Monsanto’s President and Chief Operating Officer, Brett Begemann, dismissed speculation of the company being a takeover target for Bayer or BASF.
 
"It's all wild speculation because there's nothing there," he said.
 
People familiar had previously said that hurdles caused by valuation concerns had delayed efforts by both Bayer and BASF to tie-ups with Monsanto for several months.
 
With an 18 percent market share, Bayer is ranked No. 2 in crop chemicals, according to industry data.
 
With a 26 percent market share, Monsanto is the leader in seeds.
 
(Source:www.reuters.com) 






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