Monsanto Agrees To $66B Takeover By Pharmaceutical Company

Barring any interference from worldwide regulators, the German chemical and pharmaceuticals producer Bayer, best known to American consumers for its aspirin products, will purchase the American seed and agriculture company Monsanto for $66 billion.

Monsanto is well known for controversial practices including the manufacturing of genetically modified organisms, patenting seeds and producing pesticides. Their combined industry power would be substantial.

According to Bayer, combining the two companies could result in $1.5 billion worth of synergies, over and above what each could achieve on its own.

If the merger goes through, it would create the largest seed and pesticide company in the world, according to the BBC.

"This represents a major step forward for our Crop Science business and reinforces Bayer’s leadership position as a global innovation driven Life Science company with leadership positions in its core segments, delivering substantial value to shareholders, our customers, employees and society at large,” said Werner Baumann, the CEO of Bayer, in a statement.

Bayer's offer is a hefty sum for such a takeover, valuing the company at $128 a share above the $106 share price. As Jethro Mullen and Charles Riley at CNN Money pointed out, this suggests investors are skeptical that the deal will go through.

Europeans authorities may be particularly skeptical of the deal, which would make the American company Monsanto a part of a German firm. The European Union has held a much more stringent line on genetically modified crops, Monsanto's most notorious product group, than the United States has.

The merger also follows several similar deals recently. Dow Chemical Company and the conglomerate DuPont are currently working on a merger deal, while the state-owned Chinese chemical company ChemChina recently purchased Sygenta, a significant producer in the field of agriculture that previously attracted Monsanto's interest.

Consolidation of market power in the chemical and farming industries by fewer firms is sure to draw increased skepticism from regulators, as many observers have pointed out. It's also likely to stir political opposition from environmental groups and smaller industry players, such as local farming advocates.

"Seed prices could rise for farmers, consumers could see more genetically engineered foods on supermarket shelves, and our global agricultural system could end up depending on just a few companies to meet a high percentage of the world's agricultural needs," Leah Douglas, a policy analyst for New America, wrote in a CNN op-ed when Bayer had offered a lower price for Monsanto. "In short, the $62 billion deal would further concentrate power in an already highly consolidated global seed and chemical industry."

Bayer argues that the merger will help the world meet a growing demand for food.

"The agriculture industry is at the heart of one of the greatest challenges of our time: how to feed an additional 3 billion people in the world by 2050 in an environmentally sustainable way," said Liam Condon, a member of Bayer's board of management. "It has been both companies’ belief that this challenge requires a new approach that more systematically integrates expertise across Seeds, Traits and Crop Protection including Biologicals with a deep commitment to innovation and sustainable agriculture practices."

Photo credit: Karen Eliot via Wikimedia Commons