Top US seeds firm Monsanto says it has agreed to a takeover bid by the German drugs and crop chemicals maker Bayer.
Point of view
"We believe political pushback to this deal ... could provide significant delays and complications"
The price is $66 billion (58.8 billion euros) including Monsanto’s debt.
Bayer wants to grab the top spot in the fast-consolidating farm supplies industry, combining its crop science business with Monsanto’s strength in seeds.
News update: Bayer and Monsanto to Create a Global Leader in Agriculture: https://t.co/GL1OL7vDLB— Monsanto Company (@MonsantoCo) September 14, 2016
The two companies currently supply more than a quarter of the seeds and pesticides sold worldwide.
That means competition regulators will likely demand some parts of the businesses be sold off for the deal to go ahead.
Bernstein Research analysts said on Tuesday they saw only a 50 percent chance of the deal winning regulatory clearance, although they cited a survey among investors that put the likelihood at 70 percent on average
“We believe political pushback to this deal, ranging from farmer dissatisfaction with all their suppliers consolidating in the face of low farm net incomes to dissatisfaction with Monsanto leaving the United States, could provide significant delays and complications,” they wrote in a research note.
Some of Bayer’s own shareholders have opposed it saying the company is paying too much and that this move could mean it neglects the pharmaceuticals part of its business with the shift in focus.
Monsanto shareholders definitely the winners in this deal if it passes regulatory hurdles. Bayer shareholders? Not so much….$MON— The Mays Report™ (@MaysReport) September 14, 2016
It is the largest foreign takeover ever by a German company, beating Daimler’s tie-up with Chrysler in 1998, which valued the US carmaker at more than $40 billion.
This latest consolidation in the agrochemicals sector follows Swiss firm Syngenta and China’s state-owned ChemChina getting together. Syngenta is the world’s biggest crop chemicals business.
US chemicals giants Dow Chemical and DuPont have also agreed to merge and spin off their respective seeds and crop chemicals operations into a major agribusiness.