Global chemical company Bayer has agreed to buy agchem giant Monsato in a € 66 bilion (£50 bn) deal ,find out what that means for growers
In mid-September ,Bayer agreed to pay $128 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 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 .
The US NFU called on regulatory bodies to critically review the impact of consolidation across the industry .
“We underscore the importance all mergers ,including his recent Bayer-Monsato deal , be put under the magnifying glass of the committee and the US Departament 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 ” confindent ” it would pass regulatory checks .
Bayer chief executive Werner Bauhmann 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 Sygenta and had so far received “encouraging feedback “.”To underline our confidence in the outcome of the regulatory process , we have commited a reverse break-up fee of $2 bilion and made substantial commitments , including divestiture commitments , if required by the regulatory authorities ” , he said .
The growers perspective
Growers in the UK have expressed concerns the merger could lead to limited product choice and increased input costs .
Bedforshire farmer Jonathan Blake said :” My worry is with fewer companies working to create alternative products ,the range of chemicals available is going to be restricted .Inevatbly ,this is going to impact on the price we pay for the chemicals ,which seems to be controlled by 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 .”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 yields to actually minimise their input costs .”
Although many farmers feel uneasy about the aquisition , some recognise a ” pooling of R&D resources ” could lead to faster and better solutions to problems such as black-grass control .
Norfolk arable farmer Tim Payne said :” A pooling in resources may mean increased R&D , which will only benefit UK agriculture “.
Essex grower Tom Bradshaw said he hoped the merger would not affect Bayer´s activity in the EU pesticides market .”I hope Bayer will continue to the the EU as an attractive market place and , ultimately , we as farmers will benefit from their continued investment ” , he said .
Criticism of the deal
Proffesor 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 acquisistion , but they have had to pay an enormous price for Monsato at a 45 % premium to be previously undisturbed share price ” , he said .”In effect , the bid premium is likely to represent rather more than any benefits exctracted from the combination”.