Bayer's North American headquarters in New Jersey. (Photo : Bayer)
In a deal some say was influenced by the ravages of climate change, German chemical and pharmaceutical giant Bayer AG has acquired U.S. agrochemical and agricultural biotechnology firm Monsanto Company in an all-cash deal worth $66 billion, the largest in world corporate history.
The deal ends eight months of tough negotiations and will form a company in control of over 25 percent of the combined world market for seeds and pesticides in the fast-consolidating farm supplies industry. There has been no indication of the name the new company will carry.
Because of its huge worldwide impact, the merger will definitely face an intense and lengthy regulatory review in the United States, the European Union, Canada and in other countries. The merged firm will need to file in about 30 jurisdictions for the merger.
The political pushback against the deal is expected to be the strongest in the United States where Monsanto is the largest seed company but is also notorious for its championing the use of genetically modified organisms (GMO) in crops.
Already U.S. Senate Judiciary Committee Chairman Chuck Grassley has called a hearing next week to examine the wave of consolidation. Senator Bernie Sanders, who recently ended a run for the Democratic presidential nomination, called the deal "a threat to all Americans."
"These mergers boost the profits of huge corporations and leave Americans paying even higher prices," said Sanders.
Analysts said the consolidation race in the worldwide agribusiness sector is being triggered by irrational weather patterns driven by climate change; intense competition in grain exports and a worsening global farm economy. Farm incomes are plunging because of the excessive worldwide supplies of grains.
Bayer's move to combine its crop chemicals business with Monsanto's industry-leading seeds business is the latest in a series of major agrochemicals mergers.
Analysts said Bayer wants to build a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.
Bayer said it expected the deal to boost its core earnings per share in the first full year following completion.
"Monsanto is a perfect match to our agricultural business," said Bayer CEO Werner Baumann when the offer was made last May. "We would combine complementary skills with minimal geographic overlap."
"The acquisition of Monsanto checks all the boxes in terms of strategic fit and value creation potential," he added. "At the same time, ongoing consolidation activities in the industry make this combination by far the most attractive one."
