Monsanto Agrees To Bayer’s Takeover Bid

Monsanto Co. (NYSE:MON) has reached an agreement for Bayer AG to buy the company in an all-cash deal worth about $66 billion. The deal will marry two of the world’s top farm suppliers. Details of the merger agreement is to be revealed by next week. The companies expect the deal to be closed by the end of 2017.

Monsanto agreed to sell itself to Bayer for $128 per share in cash. The price is nearly 5 percent higher than Bayer’s initial offer of $122 in May. The purchase price follows months of haggling. The Monsanto and Bayer deal would be the largest-ever all-cash acquisition. It is also the largest potential acquisition of the year. Monsanto’s shares floated around $107 Wednesday.

Monsanto’s dominant seed franchise has few overlaps with Bayer’s pesticide-focused agricultural business. Areas of potential overlap include some soybeans, canola and cotton seeds. Bayer holds a 38.5 percent share of the U.S. cotton seed market, while Monsanto holds 31.2 percent. The combined company would have about 36 percent of the U.S. corn seeds market and 28 percent in soybean seeds.

Rivals in the global agricultural sector are also merging. Dow Chemical Co and DuPont plan to merge and will spin off their seeds and crop chemicals operations into a separate business. Syngenta AG also recently agreed to a takeover by China’s state-owned ChemChina. Canadian fertilizer producers Potash Corp of Saskatchewan Inc. and Agrium Inc. have also agreed to merge, further consolidating the industry. If all of the recently announced deals are approved, three companies would control nearly 80 percent of the U.S. corn-seed market and 70 percent of the world’s pesticide market.

Critics of the deal have expressed concern over reduced competition in the $100 billion global market. Farmers worry that seed and chemical costs are rising while grain prices continue to fall and farm incomes decline. The farm economy shows few signs of rebounding any time soon.
Seed makers have already laid off thousands of employees and cancelled some research projects.

The deal will require approval from around 30 regulatory agencies around the world. The deal is expected to receive intense scrutiny in the United States, the European Union and elsewhere. The political environment for such transactions may not be in Bayer and Monsanto’s favor. Senator Bernie Sanders called the deal “a threat to all Americans.” Commenting on the matter, he said, “These mergers boost the profits of huge corporations and leave Americans paying even higher prices.” Bayer has agreed to pay Monsanto a $2 billion breakup fee if the deal is not completed.