Bayer And Monsanto: Takeover Bid Confirmed As Bayer Stocks Fall And Monsanto Shares Rise

Bayer and Monsanto: A corporate marriage made in heaven or a problematic union from the start? German-based Bayer group ended weeks of speculation by confirming its unsolicited bid for Monsanto, the controversial American seed company in a move that stirs up a new round of rumors and potential controversy.

The deal was initially released to the media by Monsanto on Wednesday, leaving Bayer to confirm the move later that evening. Neither party has released any details of the bid, however, Monsanto’s market capitalization amounts to $42 billion USD. Experts quoted by Reuters estimated the bid somewhere between 50 billion and 65 billion euros ($55 billion to $73 billion USD). Monsanto is currently reviewing the Bayer proposal with the advice of Morgan Stanley, Ducera Partners, and legal firm Wachtell, Lipton, Rosen & Katz.

With Bayer as the world’s second largest producer of crop chemicals and Monsanto the world leader in seed sales, the combined company would become the largest supplier of agricultural products on the planet. A New York Times story pegs the combined annual revenue of the resulting super company at over $67 billion USD. The sale would also help to consolidate the global pesticide and seed markets.

Shaking up the global agrichemical markets

The move by Bayer follows a global trend. As farmers around the world deal with low prices for their crops, many agrichemical companies look to sell a package of genetically modified seeds designed for hardiness and pesticides (aka “crop protection chemicals”) engineered specifically for them.

The Bayer-Monsanto deal comes in addition to a series of other big shake-ups in the agrichemical sector. ChemChina recently announced plans to acquire Syngenta, a Swiss-based agrichemical company. That deal is currently under review in the United States, where regulators cite concerns over food supply security. Some observers predict similar scrutiny of the Bayer and Monsanto deal over antitrust concerns.

Last year, DuPont, the world’s second largest seed producer, announced a merger with Dow Chemical, another major player in the agrichemical sector. The Bayer takeover of Monsanto would shrink the field of producers in the agrichemical and seed business to just four megacompanies.

German-based Bayer group is the inventor of aspirin and produces a variety of consumer health products such as the Coppertone brand of sunscreen and cancer medications. Earlier this year, Monsanto expressed an interest in acquiring Bayer’s crop science division, which produces seeds and pesticides for both agricultural and non-agricultural uses. The seed division is where the antitrust regulations may come into play since both companies manufacture seeds for soybeans, canola, and cotton.

The sheer size of the merger, which would give a unified Bayer-Monsanto about 28 percent market share, may not sit well with regulators or consumers. As noted in a CBS News report, with its focus on genetically modified seeds, Monsanto has become associated with corporate evil in the minds of many consumers and groups that have organized protests of the company’s practices online and around the world.

Bayer and Monsanto – stock markets react

While Bayer stock prices had initially increased when speculation over the Monsanto purchase began to circulate a few weeks ago, they fell over 9 percent this morning after the offer was announced to a two-and-a-half-year low. Investors may be concerned at the cost of the Monsanto purchase. UBS Global Asset Management, one of Bayer’s biggest investors, is quoted in a Reuters report as being “deeply concerned” about the financial aspects of the proposed Monsanto takeover.

In contrast, Monsanto stock was up more than 4.5 percent on Thursday morning after news of the Bayer takeover bid circulated.

[Photo by Brent Stirton/Getty Images]