Early last week, Monsanto rejected a US$62 billion buyout from the German pharmaceutical giant Bayer. A press release from Monsanto announcing the decision quoted Monsanto Chairman and CEO Hugh Grant, stating that the offer “significantly undervalues” the company. Despite pushback from shareholders, experts predict that Bayer will come back with an even higher bid than the US$122 per share they originally offered. If the deal goes through, the company will control 29 percent of the world seed market and 24 percent of the pesticide market, making it the world’s largest seed and crop chemical supplier.
It’s possible, however, that other agricultural companies, such as BASF Chemistry, are interested in making offers as well.
The proposed merger has caused a backlash in Germany, where, according to a 2015 survey by the Federal Agency for Nature Conservation, 84 percent of the population is opposed to the cultivation of genetically engineered (GE) crops. Monsanto, in particular, has been highly criticized throughout the European Union for its herbicide glyphosate.
Bayer chief executive Werner Baumann is aware of Monsanto’s reputation. Last week, he told German newspaper the Frankfurter Allgemeine Sonntagszeitung that he is open to speaking to environmentalists and NGOs about the deal. “Let’s talk about how we make agriculture more efficient to feed a growing global population with shifting dietary habits. Together with Monsanto, we want to help further increase yields.”
A recent report from the National Academies of Sciences, Engineering, and Medicine (NAS) found no evidence that GE crops pose a threat to human health. It also found no evidence that use of GE crops results in yield increases.
Talks between Monsanto and Bayer mark a growing trend of consolidation in Big Ag in the past year. In 2015, Dow Chemical Company and DuPont announced a merger and are currently in the midst of a regulatory review. In February of this year, ChemChina acquired the Swiss pesticide and seed supplier Syngenta for US$43 billion cash.
With prices for major crops experiencing a decline on the global market, agricultural companies have been seeing drops in sales. According to a report from the U.S. Department of Agriculture, this year, farmers’ income is predicted to be the lowest they have been since 2002. Despite negative trends, however, Monsanto’s shares are on the rise.