By Jesse Newman and Jacob Bunge 

Monsanto Co.'s agreement to a takeover by Bayer AG Wednesday caps a whirlwind year and a half of deal making that has reshaped the $100 billion seed and pesticide sector.

In the past year, Dow Chemical Co. and DuPont agreed to merge while China National Chemical Corp. is buying Swiss company Syngenta AG. If all three deals pass regulatory muster, the emerging three entities would effectively control more than three-quarters of U.S. corn-seed sales and 70% of the world's pesticides.

The companies say the deals will help them bring new products to markets faster and lead to bigger profits for farmers in the long run. But some farmers worry that a shrinking number of suppliers could mean higher prices for seeds and crop-chemicals and fewer overall products.

"If you take six big companies and make them three, you've just made it simpler for them to hold prices higher and maximized their ability to make better margins at expense of farmers," said Mark Watne, a 54-year old soybean and wheat farmer and president of the North Dakota Farmers Union.

The prospect of higher costs for farm supplies comes at a time when U.S. growers are navigating a multiyear slump in agricultural commodity prices and farm profits, with net farm income in 2016 expected to slide for the third straight year to its lowest level since 2009, according to the U.S. Department of Agriculture.

Some farmers say enough players remain in the marketplace to promote competition or see the deals as a reasonable byproduct of several years of reduced profitability in the sector.

"I like all the free market competition I can get," said Shane Hanna, 33, who farms 1,400 acres with his father in northwestern Indiana, adding that while he would always rather have one more vendor to choose from than less, consolidation seems like the "logical progression of business."

"I plan to farm in 2017 and I plan to farm in 2027," said Mr. Hanna. "Flexibility and the ability to roll with the punches is the name of the game in farming."

Monsanto, the world's largest seed company by sales, touched off the consolidation wave in May last year with a $45 billion acquisition proposal for Swiss pesticide giant Syngenta AG, an unsolicited approach that followed years of on-again, off-again talks about a tie-up between the two firms.

Monsanto wound up dropping its bid after repeated rebuffs from Syngenta's board.

But the strategy driving Monsanto's attempted deal -- that a deeper integration of seeds and crop chemicals will yield better products at a lower cost amid a sustained slump in agriculture -- had taken root.

As U.S. farmers last autumn brought in another massive haul of corn and soybeans, Dow Chemical Co. Chief Executive Andrew Liveris described the seed sector's deal making fervor: "Everyone is talking to everyone."

DuPont discussed a combination with Syngenta, but opted instead for a megamerger with Dow aimed at eventually creating three separate, independent companies, including an agricultural firm.

The crush of deal talks among the six global suppliers of crop seeds and pesticides drew half-joking comparisons to a grand game of Tetris and speed-dating.

Syngenta, facing aggrieved shareholders nervous they could miss out on a deal, said it was open to re-engaging with Monsanto but ultimately pursued an all-cash, $43 billion sale to China National Chemical Corp. The state-owned company's high-profile gambit to buy a top-tier seed developer raised concerns among some U.S. farmers and politicians wary of expanded Chinese influence over U.S. food security. A U.S. national-security panel last month blessed the deal, which analysts said much improved its chances of closing.

As the number of unattached seed companies dwindled, Bayer turned the tables on Monsanto and approached the U.S. company with a $62 billion bid, pitching the combination as a chance to create "a truly global agricultural leader."

Monsanto rejected that price as too low and too risky given financing and antitrust hurdles, and in July turned away a sweetened offer of roughly $65 billion, but Monsanto repeatedly said it saw logic in the deal and would entertain further discussions.

On Wednesday, Monsanto agreed to a takeover by Bayer for $66 billion including debt.

Write to Jesse Newman at jesse.newman@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

 

(END) Dow Jones Newswires

September 14, 2016 11:03 ET (15:03 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
Dow (NYSE:DOW)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Dow Charts.
Dow (NYSE:DOW)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Dow Charts.