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Bayer takeover of Monsanto would create global giant

Published:Sunday | May 22, 2016 | 5:00 AM
The logo of the chemical company Bayer at the Airport Berlin Brandenburg, in Schoenefeld, Germany.

Bayer's potential acquisition of Monsanto would create a giant seed and farm chemical company with a strong footprint in the United States, Europe and Asia, combining two businesses with complementary geographical focus.

But Bayer might have to shed part of its business because of antitrust concerns. And the price tag on any deal would be huge: Monsanto's market value is around US$42 billion.

Germany-based Bayer AG said Thursday in a short statement that its executives had met recently with their Monsanto counterparts "to privately discuss a negotiated acquisition" of the specialist in genetically modified crop seeds.

 

FAMILIAR BRANDS

 

Both companies are familiar brands on farms around the globe. Bayer, whose farm business produces seeds, as well as compounds to kill weeds, bugs and fungus, said the proposed acquisition would help it "create a leading integrated agriculture business".

Monsanto, headquartered in St Louis, Missouri, said it was reviewing Bayer's proposal. Neither company gave other details.

The possible deal had been rumoured for a week, but it was the first comment from either company.

"A combination of both companies would create US$67 billion of annual sales and the world's largest seed and crop-chemical company," analyst Ulrich Huwald at Warburg Research wrote in a research note to investors. "However, the question is if Monsanto would be interested in a deal."

Huwald said that "the businesses are geographically complementary, with Monsanto having a strong presence in North America and Bayer in Europe and Asia".

A combination of the two would have 28 per cent of the global market for pesticides and a strong presence in the US corn and soybean seed business.

Huwald said that the two companies do overlap in their vegetable and cotton seed business, which could require divestments due to antitrust issues. Bayer might also have to sell parts of its weed-killer business.

Monsanto has some 20,000 employees and produces seeds for fruits, vegetables and other crops including corn, soybeans and cotton, as well as the popular weed-killer Roundup.

Bayer, which is headquartered in Leverkusen, Germany, specialises in health care and agriculture, employs some 117,000 people worldwide and had sales last year of €46.3 billion (US$52.22 billion).