With a
new bid on the table, and amid a recent move by many in the industry to
consolidate, Germany’s Bayer are attempting a takeover of the American
agrochemical titan Monsanto which could result in the biggest supplier of seeds
and chemicals in the world.
Following
the mergers recently involving competitors including DuPont, Dow Chemical and
Swiss company Syngenta, the German chemical and drug producer is looking to
make significant strides into the GM crop arena, Monsanto being noted
specialists in the field.
The
transaction is far from being closed however, with regulators sure to have
their say first.
Monsanto
revealed in a statement released to the press, “Neither the terms of the deal
nor the assurances of any merger happening has been fully decided as yet.” The statement
added that the board of directors will also need to green light the deal for
talks to progress.
Stuart Poulson, Head of Corporate trading
at Nikko-Desjardins Asset Management commented on the news in his blog, “There
is a strong possibility the deal will go though. Both companies are playing
catch up with other big competitors in the field consolidating their holdings
recently. The only stumbling block could be the regulators.”
After
rumours recently that Monsanto had been courted by both Bayer and another German
chemicals giant BASF, Bayer confirmed they have been involved with talks saying
it had “sat down with members of the Monsanto board informally to discuss a
proposed combination of the companies.”
Following
the announcement, Bayer share prices took a 6 percent hit, which may spark a
backlash from their shareholders.
Bayer is
currently the second biggest supplier of crop chemicals after Syngenta, who
were recently acquired by ChemChina, pending regulatory approval. Monsanto also
attempted to buyout the Swiss firm last year but were rejected.
A ground
breaking merger took place in December 2015 when Dow Chemical, an American
chemical multinational head quartered in Michigan, and DuPont came together
forming a new $140 billion entity.
Tie-up concerns
In an
already embattled agricultural industry where major commodities are
underperforming, farmers have been losing income and big suppliers like Bayer
have also felt the squeeze on their annual profits.
As a
result, multinational agrichemical firms have higher amounts of seeds and
chemicals in stock meaning large scale price cuts and an increased need for
efficiency.
It’s
thought regulators will be looking at the proposed merger very carefully as
concerns have been raised the tie-up could have a dramatic effect on competition
in America. Farmers are also worried that such deals could lead to price
increases, fewer choices and too much power for any new entity that holds all
the cards.
