Global chemical company Bayer has agreed to buy agchem giant Monsanto in a $66bn deal. Alex Black and Abby Kellet look at what the merger could mean for growers
Last week, Bayer agreed to pay $128 (£98) per share for Monsanto in the biggest ever takeover by a German company. It follows recent mergers across the sector between ChemChina and Syngenta and between Dow Chemicals and DuPont.
The merger could have a wide impact on the industry. The National Farmers Union in the US slammed the deal saying previous mergers had ’stifled innovation, led to less competition, higher prices and job loss in rural America’ and it claimed this deal would do the same.
Environmentalists around the world also protested about the merger.
The US NFU called on regulatory bodies to critically review the impact of consolidation across the industry.
"We underscore the importance all mergers, including this recent Bayer Monsanto deal, be put under the magnifying glass of the committee and the US Department of Justice," said a spokesman.
Regulatory bodies from around the world, including in the EU and US, will be looking into the deal.
In May, the US NFU warned mergers had ‘time and again’ led to increased prices for crop inputs.
Despite this criticism, the company said it was ‘confident’ it would pass regulatory checks.
Bayer chief executive Werner Baumann emphasised there were few overlaps between the two companies and there were enough other options out there for growers.
He said they had been encouraged by the previous deal being approved between ChemChina and Syngenta and had so far received ’encouraging feedback’.
"To underline our confidence in the outcome of the regulatory process, we have committed a reverse break-up fee of $2 billion and made substantial commitments, including divestiture commitments, if required by the regulatory authorities,” he said.
Hugh Grant, chief executive of Monsanto, said: "When you look at it from a regulatory point of view as we studied it, it is a clean deal.
"The overlaps are clear and obvious and they are fairly minimal."
The companies declined to comment on what areas overlapped and what they expected the regulators to ask of them.
They emphasised the deal would be ‘good for growers’ as it would give more access to a variety of seed and crop protection.
However, the new company will control of more than 25 per cent of the world’s supply of seeds and pesticides.
Prof John Colley, Warwick University, said the deal could also be bad news for Bayer.
"By the time the competition authorities have finished with their demands, Bayer may regret setting a German record."
He suggested it had been pressured into the deal following the other recent mergers.
"Apart from Monsanto’s shareholders, who have hit the jackpot, this looks like a lose-lose bid. Bayer has been forced into paying too much and face major integration and competition authority risks."
He was also critical of the price Bayer had offered.
"Clearly Bayer will realise cost savings from the acquisition, but they have had to pay an enormous price for Monsanto at a 45 per cent premium to the previously undisturbed share price,” he said.
"In effect, the bid premium is likely to represent rather more than any benefits extracted from the combination."
The companies suggested the mergers in the industry were necessary to 'drive the next round of innovation'.
Liam Condon, head of Bayer’s crop science division, said: "Both companies are built on a commitment to and belief in the importance of innovation and sustainability which not only allows us to succeed in our field, but also enables us to help solve some of the world’s most pressing issues in agriculture, through our combined complementary skills in research and development."
Together, the companies have about 10,000 employees working in research and development (R&D).
"The combined R&D pipeline is expected to allow us to better serve growers and address their challenges and needs with tailor-made solutions across crops, indications and technologies," he said.
Separately, Bayer and Monsanto have done their fair share in bringing influential products to the market, with Roundup (glyphosate) and Liberator (flufenacet + DFF), for example, changing farming practices round the world.
But when speaking to Farmers Guardian, growers in the UK expressed concern a collaboration of the two companies could lead to limited product choice and increased input costs.
"We are already struggling with limited modes of action to combat weed resistance. My worry is with fewer companies working to create alternative products, the range of chemicals available is going to be restricted.
"Inevitably, this is going to impact on the price we pay for chemicals, which seems to be controlled by fewer and fewer companies every year, reducing the need for companies to be competitive."
However, Bayer crop science chief Liam Condon argued competition in the crop protection sector would not be affected.
"I think we really need to highlight the extremely high complementary nature of our offerings. There always has been high competition in this industry and, of course, this will remain," said Mr Condon.
"If we bring together the best seeds and traits in the industry, with the best crop protection and we combine this with a digital platform, we will be able to help farmers improve their harvests and their yields to actually minimise their input costs."
"There has been a great realisation over the past decade from research and development (R&D) companies that the return from investing in seeds and traits is better and more certain than investment in new pesticides because of the difficulty in getting pesticides through registration – particularly in the EU.
"I hope Bayer will continue to see the EU as an attractive market place and, ultimately, we as farmers will benefit from their continued investment."
Although many farmers feel uneasy about the acquisition, some recognise a 'pooling of resources' with regards to R&D could lead to faster and better solutions to problems, such as black-grass control.
"A pooling in resources may mean increased R&D, which will only benefit UK agriculture."
GM crops is one innovation, already used extensively in America, which some anticipate may become available to UK growers, given Roundup-ready seed is an integral part of Monsanto’s portfolio.
On September 20, executives from Bayer, Monsanto, DuPont, Dow Chemical, and Syngenta testified before the US Senate Judiciary Committee in Washington to say why these mergers should be approved.
The companies argued they would be able to combine their expertise and become more efficient.
US NFU president warned the mergers would lead to higher prices, less innovation and fewer products to choose from.