BAYER AND MONSANTO
Buyer is a lesser-known company but very famous to environmental damage and Genetically Modified Organisms. As early as the 1860s, the company was famous for making dyes from coal tar but later developed into an excellent chemical and drug company and the introduction of heroin as a cough remedy. The company today is based in Leverkusen, Germany. They manufacture drugs, but they have a crop science unit that makes weed and bug killers (MORGENSON, GRETCHEN). Their main aim is to dominate the chemical and drug markets globally.
On the other hand, Monsanto company has branches in over a hundred countries dominating the global seed market. Before monopolizing the food and chemical market, Monsanto has a varied history in artificial ingredients, plastic, growth hormones, non-biodegradable materials and even created some war weapons.
The Rationale of The Merger
Taking over Monsanto company of the United States by the German chemical company, Bayer, is seen by their chief executives as the largest corporate mega-merger that could shape the development of seeds and pesticides necessary for fueling the planet’s food supply. The merger was projected by the Bayer AG that, combining its strengths in crop protection through its herbicides, fungicides, and pesticides with those of Monsanto’s seeds, traits, and genetically modified products, will deepen its portfolio and gaining exposure into a faster-growing sector (PICKER, LESLIE et al.) That is, Bayer’s focus on plant health and Monsanto on yields would make a complementary transaction.
During the deal, the Bayer’s chief executive Werner Baumann said that they have long respected the Monsanto’s business and share their vision to create an integrated business that they believe is capable of generating a substantial value for both companies (PICKER, LESLIE et al.). They said that the corporation is committed to enabling farmers to sustainably produce enough healthy, safe and affordable food capable of feeding the world’s growing population. With the increasing climate volatility, the company claims that the combined venture would become positioned as the partner of choice for actually joined, superior solutions for supporting farmers of all sizes on every continent.
Some analysts argue that such mergers are of great concern that such genetic engineering cuts down on natural biodiversity and exposes the food supply to risks and unpredictable weather. It may also limit farmers’ choice and bargaining power because of the rising seeds prices expected to be passed on to the grocery aisles.
Beneficiaries of The Merger
Regarding the financial gains, after the merger, Bayer company’s shareholders should expect a mid-single-digit deposit to the core earnings per share in the first year and a double-digit accretion subsequently. They also expect annual interactions of close to $ 1.5 billion after three years. Monsanto’s executives and shareholders were to receive a minimum of forty-four percent of their company’s stock prices after the deal. Those company’s bankers and the deal advisors were also to earn exclusively on the deal. The merger would then see those two companies’ shareholders as the primary beneficiaries of the deal (MORGENSON, GRETCHEN).
On regards to farm inputs, the farmers will benefit in the primary as explained by Robb Fraley, the Monsanto’s chief technology officer that the merger will allow more investments, have more capabilities and build better products for farmers that they can use to grow crops with higher yields and farm better and faster (MORGENSON, GRETCHEN). That the farmers would have a wide variety of goods to choose from as the Bayer’s takeover would create the world’s supplier of seeds and agricultural sprays that work better together. The new products and innovations would increase the amount farmers can grow from a given acreage. Beyer executive Condon argued that at the end of the day, what the company is trying to achieve is to increase the farmer’s yields (Court, Emma).
If the aims and goals of the merger are to go by, then the consumers are also likely to benefit in regards to reduced costs of farm commodity in the world market. Higher crop yield by the farmers will make the food products to fall in the global market that consequently results in reduced food prices elsewhere
Losers of The Merger
The greatest losers, on the other hand, is the consumers. Bayer AG is not a stranger to controversies, and this merger would not be an exceptional case either. The company is known for its production of dangerous and controversial substances that ranges from PCBs to the toxin, Agent Orange, DDT, herbicide Roundup, and genetically modified crops that were designed to increase its use. All those are health risk substances that can impact negatively on both the environmental and human health in general.
The approval of the merger reduces the number of companies controlling the inputs to the global food supply. That triggers lack of diversity in the seed stock which in turn can make the food system more venerable to diseases and other unseen events. If that happens both the farmers and the consumers will lose drastically as it will consequently lead to higher prices of the farm, produce in the market as the farmers suffering from low prices of their commodities (Court, Emma).
Just before the takeover, some American farmers argued that they were preparing for their year’s profit to decline because of rising costs and dwindling crop prices. Those who grew corn, soy, and barley such as Don Halcomb, a farmer in Kentucky who farmed on a 7,000 acres’ farm admitted that he is already producing at a loss. He claimed that was as a result of many companies which were providing those seeds get consolidated. He saw that to happen once the merger pushes through (PICKER, LESLIE et al.)
Those sentiments were echoed by Barny Sanders who argued that the takeover of Monsanto by Bayer is a threat to all Americans and needed to be blocked. He wanted the United States Department of Justice to reopen its investigations of Monsanto’s monopoly on seeds and pharmaceutical market (PICKER, LESLIE et al.).
The domination that could be caused by the merger companies should be considered. Command creates unhealthy competition by creating or strengthening a dominant player in the market with their products they bring to market (Court, Emma). On the one hand, it creates a higher cost as a result of less competition in the market and fewer choices of products offered with less innovation.
Environmental implications that come with such mergers should also be considered. Some alliances like the case of Bayer and Monsanto may pose a serious environmental and health hazards to the whole world with their toxic products. Others include the trust during the merger deals to avoid the questions of antitrust regulations, productivity and the gains of the merger should be a priority. If the merger has positive impacts on raising the productivity of what the two companies will produce when combined, then it is a good gesture and vice versa.
The merger between companies describes a combination of two companies where another corporation completely absorbs one corporation. Regarding the Monsanto company and the Bayer AG’s merger, the United States as well as other countries of the world should be worry of the Bayer’s mysterious past first before looking into the positive implications that come with it (Patel et all.) Regarding the capability of those two-company combined, there is a likelihood of various dangerous, prohibited substances, and genetically modified crops getting into the market cheaply and in large quantity that only poses a threat to human health as well as the entire environment
Court, Emma. 2016, http://How a Bayer-Monsanto merger will wind up costing you at the grocery store.
MORGENSON, GRETCHEN. 2016, Bayer-Monsanto Deal Would Forge New Agricultural Force http://on.wsj.com/2cIeVeU.
PICKER, LESLIE et al. 2016, Bayer Deal for Monsanto Follows Agribusiness Trend, Raising Worries for Farmers http://nyti.ms/2cITuKR.
Patel, Rajeev, Robert J. Torres, and Peter Rosset. “Genetic engineering in agriculture and corporate engineering in public debate: risk, public relations, and public debate over genetically modified crops.” International journal of occupational and environmental health (2013).