Bayer&Monsanto: the next merger in the agrochemical industry is imminent

Merger mania has broken out among agrochemical corporations. The Chinese company ChemChina wants to buy the Swiss pesticide and seed  firm Syngenta for US$43bn. The two US rivals Dow Chemical and DuPont want to join forces to become the world's biggest chemical corporation that will then split into three branches. One will cover the amalgamated seed and agrochemicals business. And now Bayer has offered US$62bn for its competitor Monsanto.

Monsanto's management has rejected the offer, not as a matter of principle however but because it was too low.  Monsanto said they were “open to constructive discussions“ and could see the considerable advantages that an integrated strategy would bring. The response of  Bayer's CEO Werner Baumann was optimistic: “We're confident we can sort out all questions of finance and the regulatory issues to do with this transaction.“

Bayer's reason for the takeover is the synergy effects: “In particular, the combined businesses would benefit from Monsanto's expertise in seed and plant characteristics and  Bayer's plant protection portfolio for a wide range of indications and crops. The two enterprises would complement each other very well geographically too.“

Analysts and economics journalists have gone into the risks of a merger: they have pointed out that Monsanto's business has not been doing so well in recent times and in the EU the renewal of authorisation of the herbicide glyphosate, to which the genetically engineered plants of Monsanto are resistant,  is in the balance. “If the authorisation of glyphosate is not extended in the EU the value of Monsanto has to be recalculated,“ commented the Süddeutsche Zeitung and it pointed to the risk of prosecution associated with a herbicide that could possibly be carcinogenic. “Why would Bayer want to be associated with a company so many people hate?“ asks Die Zeit and talks about the possible negative consequences for its reputation. Bayer's shareholders are worried too because, as the first rumours began to circulate last week, the value of the company's shares fell. It fell even further when the purchase price was announced.