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A merger of Bayer and Monsanto by Q1 2017?
The global agricultural sector has been rapidly consolidating, as a three-year decline in crop prices has prompted agribusiness companies both to cut costs and to build in scale. The past year has seen two significant mergers: between Dow Chemical and DuPont in December 2015, and between Syngenta and China National Chemical Corp. in February 2016.
In May 2016, German multinational chemical and pharmaceutical company Bayer approached American multinational agricultural biotechnology company Monsanto with a proposed acquisition. Bayer is a leading producer of pesticides, while Monsanto dominates the global market in seeds and crop genetics; together, Bayer proposed, the companies could create “a truly global agriculture leader.”
Monsanto rejected Bayer’s first bid of $62 billion ($122 per share), then rejected a revised bid of $64 billion ($125 per share)—a move some analysts considered overconfident. A top Bayer shareholder floated the possibility of a hostile bid to put pressure on Monsanto, though the company affirmed its commitment to a friendly negotiated deal.
In early August, Bayer signed confidentiality agreements to conduct due diligence on Monsanto, a process that is expected to take several weeks. Bayer’s examination of Monsanto’s financial accounts is a crucial step in any possible deal, but no guarantee has been made by either side.
The stakes for this deal are high: a merger between these two multinationals is considered the final step of the agricultural sector’s massive consolidation. Critics warn that the merger could have devastating effects on the global food supply and agricultural market. A white paper written by two former employees of the Department of Justice Antitrust Division argues that the deal is “presumptively anticompetitive” and that it violates a 2008 court order against Monsanto, concluding that “the antitrust enforcers must not allow this merger to proceed.” The European Commission is also keeping a close eye on the deal and promises to closely examine any merger for violations of European competition policy. In a broader context, Monsanto in particular has long been a target of both legal controversy and popular protest for its large-scale development of genetically modified organisms, the health and environmental effects of its products, and its history of aggressive litigation against small farmers.
By March 30, 2017, will Bayer and Monsanto receive final regulatory approval for a merger?
This question will resolve as positive if a credible media outlet reports on or before March 30, 2017 that Bayer and Monsanto have been granted approval for a merger from the U.S. Federal Trade Commission and Department of Justice and from the European Commission.
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