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A seed giant is born : Bayer, Monsanto deal
2016-10-09

Singapore: The Bayer Monsanto deal has made headlines for many reasons. The mega deal has received mixed reactions from many analyst and farmer groups, with Organic Consumers Association tagging it as a "Marriage Made in Hell" The company heads and few experts however described the deal as a means to arrest food scarcity and plan to improve "the lives of growers and people around the world."

German pharmaceutical and chemicals maker Bayer AG has recently made an open offer to buy upto 26 percent additional stake in Monsanto India for more than Rs.1,100 crore, as per a stock exchange filing. The drug maker is all set to buy US-based seed conglomerate Monsanto Co for a whopping $66 billion.

The deal, agreed after months of back and forth negotiations, will dramatically expand Bayer in the U.S. and increase its presence in agricultural seeds, where Monsanto is an industry leader. The merger is being presented as a way to scale Bayer's operations in seeds, crop protection and other agricultural specializations as demand for vegetables and grains surges in the coming decades.

The merged entity will benefit from Monsanto's leadership in seeds and its recent acquisition of the Climate Corporation, while Bayer's global crop protection presence may open up new markets for growth.

"Together Monsanto and Bayer will build on our proud tradition and respective track records of innovation in the agriculture industry, delivering a more comprehensive and broader set of solutions to growers," Hugh Grant, CEO of Monsanto, said in a statement. The combined business is expected to give farming customers new solutions, including agronomic insight supported by Monsanto's digital farming applications, which can bolster yields, efficiency and environmental sustainability.

The open offer will be for acquisition of up to 44,88,315 fully paid-up equity shares from the public shareholders of Monsanto India. This represents 26 percent of the fully diluted voting equity share capital of the company. The offer price has been set at Rs. 2,481.60 per share.

Bayer and Monsanto have been operating in India for some time. While Monsanto India focuses on Bt cotton, maize and agri products, Bayer CropScience sells seeds, crop protection and non-agricultural pest-control products. Monsanto operates through three entities in India-Monsanto India, Monsanto Holdings Pvt. Ltd and JV firm Mahyco Monsanto Biotech India, employing over 1,000 people.

"We are pleased to announce the combination of our two great organizations. This represents a major step forward for our CropScience 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," Werner Baumann, CEO of Bayer, said in a statement.
"Today's announcement is a testament to everything we've achieved and the value that we have created for our stakeholders at Monsanto. We believe that this combination with Bayer represents the most compelling value for our shareowners, with the most certainty through the all-cash consideration," added Monsanto CEO Grant.

In a press release, Pesticide Action Network senior scientist Marcia Ishii-Eiteman said, "Just six corporations already dominate worldwide seed and pesticide markets. Additional consolidation will increase prices and further limit choices for farmers, while allowing Monsanto and friends to continue pushing a model of agriculture that has given us superweeds, superbugs and health-harming pesticides. Instead, we need to invest in agroecological, resilient and productive farming."

Many analysts term the deal as a compromise in food safety. A skeptical Wall Street Journal reporter suggested that the merger, one of three in the works in the agricultural industry, is a sign of trouble. "The dominance of genetically modified crops is under threat," wrote Jacob Bunge on Sept. 14.

The merger is expected to go through intense and lengthy regulatory approval processes across several countries, including the US, Brazil and Canada as well as the EU. It also has to be approved by Indian authorities, including the Competition Commission of India and stock exchanges.


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