After months of wrangling over price, Bayer, the German drug and crop chemical maker, has taken over the U.S.-based seeds company Monsanto for $66 billion, making this deal one of the largest corporate mega-mergers in a year already full of such deals. If the acquisition is completed, the new company will preside over roughly a quarter of the world’s seed and pesticide supplies, making it one of the world’s largest agriculture conglomerates.
The all cash deal is valued at $128 a share, up from Bayer’s previous offer of $127.5 a share. Bayer will have to pay a $2 billion antitrust breakup fee to Monsanto if the deal falls through. Some of Bayer’s shareholders have been highly critical of a takeover that they say risks overpaying and neglecting the company’s pharmaceutical business.
However, the proposed merge will likely face a intense scrutiny and a lengthy regulatory process in the United States, Canada, Brazil, the European Union and elsewhere involving roughly 30 agencies around the world. Monsanto is the world’s largest supplier of genetically modified seeds, which now dominate American farming but are still a major source of environmental protests in Europe and beyond.
Meanwhile, the American Farm Bureau Federation has called for the Justice Department to review the business climate surrounding the mergers of Dow and DuPont, and Monsanto and Bayer, rather than just consideration of the individual mergers.
Bob Young, the Farm Bureau chief economist who is scheduled to testify at a Senate Judiciary Committee hearing on the mergers next week, told reporters today that a “good business case” could be made for the mergers, particularly because they are between seed and chemical companies. The downturn in the agricultural economy and the regulatory difficulties of bringing new products to market – and the litigation that often follows approvals – are also creating incentives for mergers, he said.
But, Young said he agrees with the concerns of Senate Judiciary Committee Chairman Charles Grassley (R-IA), that fewer players in the market may mean higher prices. “Market forces led to deals like the one announced this week, but we know that major-company mergers have a profound impact on the tools available to farmers and ranchers, sometimes to their detriment,” Young said.
“This deal between Monsanto and Bayer comes close on the heels of the proposed Dow-DuPont merger,” he continued. “Farm Bureau believes the Department of Justice should undertake a close review of the overall business climate that has encouraged these combinations, rather than evaluating them in isolation. Consumers must continue to have fair access to the best technologies and innovation.
