Canola was often cited as an example of what a merged Bayer and Monsanto will look like as the companies announced Bayer’s US$66 billion purchase of Monsanto at a New York press conference this morning.
Bringing the two farming inputs companies together as one larger entity is hoped to allow them to offer a full set of tools from seed and seed coatings to weed and disease control and even digital technology to manage applications and crop planning and development.
Mergers such as ChemChina’s acquisition of Syngenta and the merger of DuPont and Pioneer have been hot topics in the agriculture world for the past couple of years. Since the end of April, Bayer’s moves to obtain the American company Monsanto have made headlines.
Hugh Grant of Monsanto, in a joint announcement with Bayer’s CEO Werner Baumann, said the $128 per share offer reflects the value of the company, about 20 times earnings for the company.
He said the deal would be in the interests of farmers, increasing the capacity of the company to deliver discoveries and new technology at a faster pace and more broadly to producers.
“Improving the time from discovery to delivery,” he said.
Baumann also focused on the benefits to producers during announcement of the deal, which must still pass regulatory hurdles in “30 jurisdictions we need to file for in merger control purposes. In U.S. or Canada or Brazil and EU and a whole bunch of additional countries, we are requested to file in.
“The combined business will be ideally suited to cater to the requirements of farmers … because we have equal and meaningful strength in crop protection, seeds and traits and digital and analytical tools.”
Grant said there are some overlaps in the products of the two companies, but for the most part they have fewer than might be expected. Areas where regulators could find the need to require the companies to divest of some products are canola, cotton and soybeans, where the two have competing business with farmers.
Should the deal go ahead, the new company would be the largest of its kind with the chemical business centred in Manheim, Germany, and seeds, biotech products and North American operations located in St. Louis, Missouri.
Baumann said the savings, which would start to accrue in the third year, after the closing of the deal, would be about $1.5 billion annually, starting with administration, sales and marketing.
The two companies spend a combined $2.5 billion annually on research and development of agricultural products, and Baumann said they plan to continue with large investments in that area, keeping research centred in Raleigh, North Carolina.
“Closing the gap (between food and crop) supply and demand that is unfolding in the world is what we see being achieved,” said Baumann.
“Opening the next generation of farming and enforcing Bayer as a true leader in crop science,” he said.
He said the combined company would focus on sustainable farming that would provide producers with the ability to reduce crop applications and inputs while enhancing yields and margins.
It would also create a digital platform for producers that would use tools such as satellite reconnaissance to help farmers know just what areas to treat.
Baumann said producers aren’t forced to use the company’s products, so these would have to be providing good value to growers. He said the next generations of research by the larger company might even cause it to provide guaranteed savings or yield increases to producers.