Bayer-Monsanto: What it Means So Far
14 September 2016 More than five months in the making, the Monsanto board of directors accepted Bayer’s $66-billion bid to buy the company. Details will continue to emerge as the combined company seeks regulatory approval, a process that is expected to finish in late 2017.
Here is what we know:
1) The combined company’s global biotechnology business, including R&D and commercial activities, will be located in St. Louis, Missouri, the current headquarters of Monsanto, which will also become the North American commercial hub. The chemical crop protection headquarters will be in Monheim, Germany, the site of Bayer’s headquarters, with an “important presence” in Durham, North Carolina, Bayer’s current commercial hub in North America. The company’s digital farming business, anchored by Climate Corporation, will remain in San Francisco.
2) Bayer will be the world’s largest agriculture company. The combined company had $23 billion in agriculture sales in 2015. By comparison, the combined Dow-DuPont posted $16 billion in sales in 2015; ChemChina, which includes Syngenta and Adama, had revenues of about $17.5 billion in 2015. Combined sales of the three conglomerates, which includes seed sales, constitutes an astounding share of the global market. BASF’s sales in 2015 were €5.8 billion ($6.5 billion).
3) R&D, innovation, and precision agriculture drove this acquisition. “Mid to long term, the combined company plans to provide growers with integrated solutions based on the smart combination and optimized usage of products, agronomic advice through digital agriculture solutions,” said Liam Condon said in a conference call after the announcement. He is a member of the Board of Management of Bayer AG and head of the Crop Science Division. He later said the combined company is capable of providing customized agronomic advice and product recommendations for specific crops in specific climates throughout a plant’s lifecycle.
4) The deal offers farmers seed, crop protection, biostimulants, data, and agronomic consulting in a single platform, the coveted one-stop shop for agribusinesses. The combined company is slated to reinvest $2.5 billion annually into R&D, which will be used for new discoveries, as well as integrating its current offerings into an accessible platform for end users.
Here’s what we don’t know:
1) Will regulators give it a green light? Antitrust regulators in all major markets will be looking at this deal in tandem with the others waiting for approval. When asked if Bayer had identified divestments that might make the deal more palatable for antitrust, executive declined to preempt regulators, saying it was up to regulatory authorities to tell Bayer what to do, and not up to them to guess. This seems unlikely, and divestment talks are likely happening in advance of regulatory oversight.
2) What will happen to the Monsanto name? Officially, no decisions have been made, and the organization says it will evaluate the brand’s value in each market where it operates. But if you read between the lines, then you can start saying your goodbyes to one of the most vilified corporate brands in human history. Bayer likely will phase it out very slowly or associate it only with specific seed brands with which Monsanto is already synonymous, such as its RoundUp Ready line. Otherwise, it runs the risk of simply transferring the public’s attitudes about GMOs onto the new company.
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