Cue the “Imperial March.” Bayer’s repeated attempts to buy Monsanto have finally proven successful as announced today. Yes, Bayer will soon own Monsanto if regulators approve. The Germany-based Big Pharma and crop chemical company offered U.S.-based seed company Monsanto $66B or $128 per share. This is an increase of $0.50 per share from its last offer and the largest merger offer of 2016, as well as the biggest cash bid ever recorded. It is also “16.1 times Monsanto’s forecast core earnings for 2017,” according to Jacob Thrane, an analyst at Baader Helevea Equity Research.
Monsanto is the world’s biggest seed business and Bayer the second biggest in crop chemicals. The first in that sector is Syngenta, a Swiss-based company. The Empire’s, I mean, Bayer’s goal is making something of a mega-store for farmers, specializing in all their crop chemical, seed and computer-aided services needs.
The company that brought us such “well-tested” (that’s sarcasm) medical devices, such as Essure, a dangerous “permanent” birth control device is now going to be holding the reins of the company that brought us DDT, Roundup, PCBs, Agent Orange and Dioxin, as well as genetically modified “foods” the long-term safety of which is still under debate.
Why does one get the feeling this isn’t going to end well for us, especially for farmers and most especially for smaller farmers?
Werner Baumann, Bayer’s Emperor, um, CEO, said, “The combined business will be ideally suited to cater to the requirements of farmers … because we have equal and meaningful strength in both crop protection, seeds and traits, and digital and analytical tools.”
For one thing, certain industry analysts have opined that this “marriage made in Nightmareland” might tick off said farmers who are, rightly so, afraid that the loss of competition could cause all these wonderful things to become even more expensive. These same analysts think that certain U.S. politicians might take issue with one of the country’s major agriculture suppliers being owned by a foreign corporation. These are not unrealistic concerns given that the Empire would end up ruling over 25% of the total world market in pesticides and seeds.
Other experts have also weighed in on the deal, expected to close no later than December 2017. These experts state that this merger is certainly going to take place under a powerful microscope. Even some of Palpatine’s Baumann’s bosses (Bayer’s shareholders) are concerned. They think the merger is too expensive and takes the focus off of Bayer’s Big Pharma business. Hmmm… If Bayer stops churning out dangerous medical devices like Essure, this may not be a bad thing. However, who knows what will happen when it takes over more than a quarter of the Big Ag market. “Out of the frying pan, into the fire?” It’s too soon to tell, apparently.
According to Mr. Thrane, the form the New Empire takes is still unclear. Antitrust regulators (some of the ones staring down the microscope) could call for sales of certain assets before approving the deal. These assets include some cotton, soybean and canola seeds.
Bayer however, is optimistic that its takeover of Monsanto will go off as planned. The company told the press it had to get the OK from “antitrust authorities in 30 jurisdictions.” Initial feedback from politicians and regulators was “encouraging,” according to the report. They must be buying talking to different politicians than the analysts previously mentioned.
While some shareholders are displeased, Markus Manns, a fund manager for one of Bayer’s top 12 investors, Union Investment, praised the deal as logical. “Bayer’s competitors are merging, so not doing this deal would mean having a competitive disadvantage.”
Bayer’s dowry for this ghastly marriage consists of $19B raised by “issuing convertible bonds and new shares to its existing shareholders,” as well as backing from some pretty big names in the financial sector. JP Morgan, HSBC, Goldman Sachs, Credit Suisse and BofA Merrill Lynch have pledged $57B in bridge financing.
If approved, the mega-company could create $1.2B in cost synergies along with $300M in sales synergies in only three years.
What happens if regulators object to the marriage rather than “forever holding their peace?” Bayer writes a “Sorry, it didn’t work out,” check in the amount of $2B to Monsanto and, presumably, they part as friends.
One wishes one could be optimistic about this merger; that somehow, it would feed a hungry world and not put small, independent (and organic) farmers out of business, but one has seen too many of the “good things” both of these giants in their respective industries have done. Granted, there are drugs that do help people, but when Bayer messes up and hurts people, its track record of doing the right thing is abysmal. Likewise, Monsanto is known for its attempts to squash the peoples’ right to know what we’re putting into our bodies.
No, one is afraid that optimism has left the building on this one, folks.
Help us, Federal Trade Commission, you’re our only hope!