Bayer Rumored to be Exploring Bid for $40 Billion Seed Company Monsanto
May 12, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Insiders at either Monsanto or Bayer AG have told Bloomberg that Bayer is considering an acquisition bid for the American agribusiness giant.
Headquartered in St. Louis, Missouri, Monsanto has a market value of around $40 billion. Bayer, located in Leverkusen, Germany, has a market value of about $96 billion.
The synergies for the two companies primarily revolve around Bayer’s seed business. Bayer, of course, invented aspirin, and is primarily a drug company, but it also has a new insecticide called Sivanto, which kills aphids and whiteflies, but does not hurt bees. Bayer also produces a wide range of seeds. Monsanto is the largest maker of seeds, as well as the blockbuster herbicide, Roundup.
Chemical and agrichemical businesses have been consolidating recently. Midland, Michigan’s Dow Chemical is in the process of merging with Wilmington, Delaware-based DuPont to create DowDuPont. The merged companies will have a market capitalization of about $130 billion.
In February, the Chinese government-owned China National Chemical announced plans to buy Swiss-based Syngenta AG for $43 billion, which would create the world’s largest supplier of crop-protection products, according to USA Today.
In a video posted at the time, ChemChina Chairman Ren Jianxin said, “We are concerned about the need to increase global crop yield while conserving scarce natural resources.” The merger of the two companies would help growth in China, “where there is rapid modernization driven by the need to increase grain productivity and increase food quality.”
ChemChina offered $465 for each Syngenta share. ChemChina is headquartered in Beijing, and is not publicly traded.
Monsanto has considered deals with Bayer previously, as well as Germany-based BASF. Those possible deals have ranged from full mergers to selling off some of its various business units, as well as possible joint ventures. Apparently, Bayer suggested a full takeover of Monsanto in March, but Monsanto declined, according to the Bloomberg sources.
Monsanto attempted to buy Syngenta in 2015 for $46.2 billion, but was turned down. Monsanto’s quarterly sales that ended in February were down 13 percent from the previous year’s period. According to Bloomberg, “Corn and soybean prices fell in the last three calendar years, cutting net farm income in the U.S. and hurting demand for everything from tractors to weedkiller.”
The advantages for Bayer would be to bolster its seed business. The advantage for Monsanto would be to cut its dependence on the agriculture business. Monsanto has indicated for some time that it was interesting in teaming up with a large agricultural chemicals company because, as Reuters writes, “farmers will increasingly look for one-stop shops offering seeds, pesticides and digital services such as satellite-guided spraying and harvesting.”