Bayer wants to buy Monsanto for $62 billion, hooking up the German chemical and drug company with the St. Louis-based producer of seeds and weed-killers.
The deal would create a global giant in agriculture technology touching much of global food production through the development of seeds and pesticides.
Here’s a look at the deal and what it would mean for farmers, workers, consumers and investors.
Q: Who wants to buy whom?
A: Bayer is offering to acquire Monsanto, which makes seeds for fruits, vegetables, corn, soybeans and cotton, as well as weed-killer Roundup. It has more than 21,000 employees worldwide, about half of whom work the U.S. in 33 states including Idaho. Monsanto has a phosphorus mine in Soda Springs and operations in Filer, Nampa, and Payette.
Bayer, headquartered in Leverkusen, Germany, employs some 117,000 people worldwide. It makes pharmaceuticals, over the counter medicines such as Aleve and Alka-Seltzer, and farm chemicals.
Q: Why would Bayer want to buy Monsanto?
A: The takeover would create the world’s largest seed and farm chemical company with a strong presence spread across the U.S., Europe and Asia.
Bayer said combining research and development as well as product lines would make the two companies worth more together than separately. The combined company would have higher earnings and save $1.5 billion a year by eliminating overlapping functions and overhead.
They would combine different regional strengths: Monsanto is big in the United States, while Bayer has a larger presence in Europe and Asia.
Bayer says the world needs more productive agriculture to meet the food needs of a growing world population. Monsanto says it’s considering the offer.
Q: Why are investors skeptical?
A: There’s the fact that some people don’t like Monsanto’s business in selling genetically modified crop seeds. Such seeds have been blocked in some countries and been a subject of anxiety among some consumers and the target of environmental activists.
Q: Will Bayer now try to sell genetically modified Monsanto crop seeds in Europe?
A: Unlikely. Political resistance to genetically modified crops remains strong in Europe. Monsanto has only one product there, a pest-resistance variety of maize, and has given up on applications for more after officials failed to act on them despite approval by the European Food Safety Authority.
Liam Condon, head of Bayer’s crop science division, said that “the whole discussion is a political one and we don’t see that changing anytime soon.”
Q: What’s going to happen to people who work for Monsanto?
A: The the head office for the combined seed business will be in St. Louis, Missouri, where Monsanto is headquartered. But some jobs probably have to be lost somewhere to achieve the advertised savings, says Grote.
Neither company offered any detail on that issue. Chief Finance Officer Johannes Dietsch mentioned marketing and research and development as two areas where synergies could be found.
Q: What would the deal mean for farmers?
A: Bayer said customers will get a broader range of products such as seeds and pesticides that work better together. New products and innovation would increase the amount farmers can growth from a given acreage. Bayer executive Condon said that “at the end of the day, what we are trying to do is increase farmers’ yields.”
Analyst Ulrich Huwald at Warburg Research said that the combined company would control 28 percent of the world’s market for pesticides and would have a “strong presence” in the U.S. market for corn and soybean seeds. Anti-trust regulators will scrutinize the deal to see whether it means less competition.
Mergers and acquisitions expert Grote said that “big players have some ability to set prices higher.”
But the impact on how much farmers would pay is impossible to determine at this point, he said.