By Jacob Bunge and Jesse Newman
Bayer AG's offer to buy Monsanto Co., on the heels of two other
giant agricultural deals, would put a significant share of the
corn-seed and pesticide market in the hands of just three
companies, raising concerns among U.S. farmers and legislators
about more expensive products and fewer choices.
Germany's Bayer on Thursday said it had approached St.
Louis-based Monsanto about a possible deal. Details weren't
disclosed, but the bid would likely be above Monsanto's current
market valuation of $42 billion, making it the largest-ever German
takeover of a foreign company. Monsanto said late Wednesday that
its board would consider the unsolicited approach, and declined to
comment further on Thursday.
In a little over six months, Dow Chemical Co. and DuPont Co.
reached a merger deal that would then split the new entity into
three new companies focused on agriculture, materials and specialty
products. And government-owned China National Chemical Corp. agreed
to acquire Swiss pesticide and seed company Syngenta AG. Both deals
are currently under regulatory review.
Any further industry consolidation would likely require
antitrust authorities at the U.S. Department of Justice and the
European Commission to alter their analyses of the agriculture
sector's already-announced deals, said Andre Barlow, partner at
Doyle, Barlow & Mazard PLLC, who advises companies on merger
reviews but isn't involved in any of the agricultural deals.
"The Dow-DuPont and ChemChina-Syngenta [deals] raise their own
issues, but the DOJ will have to examine how all three deals impact
the competitive landscape going forward in seeds and crop
protection," Mr. Barlow said.
The Justice Department didn't respond to requests for
Following these deals, a potential combination of Bayer and
Monsanto would put 83% of U.S. corn seed sales and 70% of the
global pesticide market under the control of the three
consolidating companies, raising fears from the agricultural sector
at a time when farmers face heavy pressure after three years of
sliding crop prices.
"There will almost certainly be much less competition in the
marketplace, and as a direct result of that farmers will end up
paying higher prices than they otherwise would be paying," said
Roger Johnson, president of the National Farmers Union, a
Washington-based lobby group for farmers and ranchers.
The companies have previously portrayed these deals as
beneficial for farmers because they would allow growers to cut
their own costs, pass on savings to customers and potentially bring
new products to market faster.
A spokesman for Syngenta said the company "is focused on closing
the ChemChina transaction, which will ensure continued choice for
Dow and DuPont didn't respond to requests for comment, and Bayer
couldn't be reached for comment on the matter.
Analysts were mixed on financial merits of the latest potential
tie-up. Sanford C. Bernstein & Co. analysts said acquiring
Monsanto outright "does not make sense financially" as Bayer likely
would need to issue $30.3 billion in equity and raise $16.8 billion
in cash, and may need to sell its animal-health business to help
fund a deal. Absorbing Monsanto and then splitting off the combined
agriculture business "could create value," Bernstein analysts
Bayer investors appeared to question such a move Thursday,
sending Bayer shares 8.2% lower at EUR88.51 in Frankfurt. Monsanto
shares closed 3.5% higher at $100.55.
Monsanto late Wednesday said there was no guarantee of a deal.
The company has explored consolidation previously, including its
failed $46 billion bid for Syngenta AG last year. It isn't clear
whether Monsanto wants to be sold or whether the companies would be
able to agree on terms.
Seed companies like Monsanto and DuPont have battled one another
on price to retain market share as a slumping agricultural sector
and falling corn and soybean prices have forced farmers to scrimp
on spending on seeds, sprays, fertilizers and equipment. Monsanto,
the world's largest seed company, also licenses genes that enable
biotech crops to withstand pests, herbicides and drought.
In the U.S., farm-state politicians could raise food-security
concerns when confronted with the potential for about 40% of U.S.
corn and soybean seeds being sold by non-U.S. companies if Monsanto
"I don't know whether a foreign company would have as much
interest in American agriculture that a domestic company has," Sen.
Charles Grassley (R., Iowa) said Thursday.
Mr. Grassley said a Bayer-Monsanto deal would likely prompt him
to raise concerns with the Justice Department. Mr. Johnson from the
NFU said the group plans to ramp up efforts to take its concerns
over competition to lawmakers and press for deeper scrutiny of the
Meanwhile, opposition to genetically modified organisms is
strong across much of Europe, and only one biotech crop is approved
to be grown in the 28-nation European Union.
While that opposition doesn't translate into legal grounds to
stop Bayer's proposed acquisition of Monsanto, analysts said, it
may spark fresh pushback from critics of genetically modified
crops, who have argued that pesticides tailored to biotech seeds
cause environmental harm and that widespread planting of single
crops diminishes biodiversity.
"Monsanto represents so much of what's wrong with agribusiness,"
said Anton Hofreiter, head of the opposition Green Party grouping
in the German parliament. "At the same time people are becoming
more skeptical about the agricultural industry, Bayer turns around
and invests in this consumer and environmentally hostile
Combining Monsanto's No. 1 position in crop seeds with Bayer's
much broader pesticide portfolio would lead to 28% of world-wide
pesticide sales, 36% of the U.S. corn seed market and 28% in
soybeans, according to Morgan Stanley estimates.
The Dow-DuPont deal forged last year would form a new player
with about 17% of global pesticides, 41% of U.S. corn seed sales
and 38% of U.S. soybean seeds. And Syngenta's sale to ChemChina
would give the Chinese state-owned company 26% of the global market
in crop chemicals, along with Syngenta's businesses in corn,
soybean and vegetable seeds.
Nathan Fields, director of biotechnology at the National Corn
Growers Association, said U.S. farmers want companies to compete
and keep farm supply prices down. But with the farm sector
downturn, "having a lot of competitors and not having healthy
competitors is a completely different issue," he said.
Some farmers, like Tim Malterer, said they see the wisdom of
corporate mergers. "As times get tougher I definitely see the
benefit of working together and merging," said Mr. Malterer, who
raises corn and soybeans on about 750 acres near Janesville, Minn.,
and buys Monsanto seed and chemicals from Dow, DuPont and Syngenta.
"My one concern is whether us, as the end customer, will be taken
care of, versus stockholders instead."
--Sarah Sloat contributed to this article.
Write to Jacob Bunge at email@example.com and Jesse Newman at
(END) Dow Jones Newswires
May 20, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.