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Five things to know about the Bayer-Monsanto megadeal
FRANKFURT AM MAIN, June 7, 2018 (BSS/AFP) – Bayer may have finally
completed its hard-fought takeover of US seeds and pesticide maker Monsanto,
but that is unlikely to silence critics who have dubbed the tie-up a
“marriage made in hell”.
From fears about the German giant’s dominance in global crop production to
concerns about the use of genetically modified seeds and harmful weed
killers, here’s what you need to know about the $63-billion megadeal.
– Heroin and Agent Orange –
Founded in Germany in 1863, Bayer is still best known for making aspirin.
More infamously, it briefly sold heroin in the early 20th century, marketed
as cough cure and morphine substitute.
During World War II, Bayer was part of a consortium called IG Farben that
made the Zyklon B pesticide used in Adolf Hitler’s gas chambers.
Through a series of acquisitions over the years, Bayer has grown into a
drug and chemicals behemoth.
It reported revenues of 35 billion euros ($41 billion) last year and
employs nearly 100,000 people worldwide.
Monsanto meanwhile was established in St. Louis, Missouri in 1901, setting
out to make saccharine.
By the 1940s, it was producing farm-oriented chemicals, including
herbicide 2,4-D which, combined with another dangerous chemical, was used to
make the notorious Vietnam War-era defoliant Agent Orange.
In 1976, the company launched probably its best-known product, the weed
killer Roundup.
In the 1980s, its scientists were the first to genetically modify a plant
cell. Monsanto then started buying other seed companies and began field
trials of GM seeds.
It eventually developed soybean, corn, cotton and other crops engineered
to be tolerant of Roundup.
Today, Monsanto boasts annual sales of some $15 billion and over 20,000
employees.
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– A keen suitor –
In an industry preparing for a global population surge with billions more
mouths to feed, Bayer was keen to get its hands on Monsanto’s market-leading
line in GM crop seeds designed to resist strong pesticides.
It was also lured by Monsanto’s data analytics business Climate Corp,
believing farmers will in future rely on digital monitoring of their crops.
The tie-up comes amid a wave of consolidation in the agrochemicals
industry, spurring Bayer to become a bigger player if it did not want to get
left behind.
But Monsanto wasn’t easily wooed, and Bayer had to increase its offer
three times before the US rival finally agreed to a deal at $128 per share in
2016.
– High price to pay –
The takeover, the largest-ever by a German firm, comes at a high cost to
Bayer.
As well as the eye-watering price tag, Bayer must give up much of its
seeds and agrichemical business to satisfy the competition concerns of global
regulators.
Those divestitures have gone to none other than Bayer’s homegrown rival
BASF, making it the unexpected beneficiary of the mega-deal.
Bayer’s sacrifices mean the takeover will be less lucrative than expected,
with annual savings now forecast to amount to $1.2 billion from 2022 onwards
— some 300 million less than initially thought.
– Goodbye ‘Monsatan’ –
Hoping to ditch Monsanto’s toxic reputation, Bayer will drop the company’s
name from its products after the takeover.
Dubbed “Monsatan” and “Mutanto”, the US firm has for decades been targeted
by environmental groups, especially in Europe, who believe that GM food could
be unsafe to eat.
Campaigners also abhor Monsanto’s production of glyphosate-based Roundup,
which some scientists have linked to cancer.
Friends of the Earth, which has labelled the Bayer-Monsanto merger a
“marriage made in hell”, said their protests will now be turned on Bayer so
long as it keeps up Monsanto’s practices.
– What does this mean for farmers and consumers? –
The Bayer-Monsanto union follows last year’s merger of US companies Dow
and DuPont and the tie-up between Swiss-based Syngenta and ChemChina.
These three giant corporations now control more than two thirds of the
global market for seeds and pesticides — although Bayer’s sell-offs have
allowed BASF to become a sizeable fourth competitor.
While Bayer has been able to ease regulators’ worries, critics say too
much power is now in the hands of just a few players, potentially pushing up
prices for farmers and limiting choices.
Bayer has vowed to continue developing some of Monsanto’s most
controversial activities, including the crop protection technologies it
insists are needed to meet growing food demand.
It has however promised not to introduce GM crops in Europe.
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