After months of negotiations, Bayer AG BAYRY announced Thursday that it signed a definitive merger agreement to acquire Monsanto Company MON for $128 per share in an all-cash deal worth $66 billion. If the buyout successfully makes it through the regulatory process, the agriculture and farming industry will certainly be changed forever.
The German drug and crop chemicals maker and the world’s largest seeds firm will merge to create a global agriculture superpower. The combined entity will leverage Monsanto’s expertise in the Seeds & Traits and Climate Corporation platform and Bayer’s Crop Protection product line to create a true giant in the industry (also read: Bayer to Boost Agriculture Suite with $66B Monsanto Buyout).
The Times They Are A-Changin’
Bayer and Monsanto’s consolidation of businesses is the latest in what is becoming a completely different chemicals and agriculture landscape. Just a few weeks ago, the merger between Bayer rival Syngenta SYT and ChemChina was approved by regulators, and industry giants Dow Chemical DOW and DuPont DD are working on receiving approval for their own merger in the EU.
Syngenta, which currently sits just above Bayer as the world’s largest crop chemicals producer, was sold to state-owned ChemChina for $44 billion. The deal faced an uphill battle to receive approval after a group of U.S. senators urged the government to dissect the deal due to concerns over its effects on food security and the American agriculture industry as a whole (also read: Syngenta Stock Rallies 10% on ChemChina Deal Approval).
The Dow Chemical and DuPont merger has also hit a snag, as EU regulators seem to be taking their time on an antitrust probe that was launched to investigate the deal. In July, shareholders of both companies approved a merger that would value the newly-formed company at approximately $130 billion (also read: Dow (DOW) and DuPont (DD) Shareholders Approve Merger).
While DowDuPont isn’t quite a guarantee, the recent trend of collaboration within this industry is noteworthy. The leaders within the greater agriculture sector are desperately trying to consolidate in an effort to protect their current market share, while also expanding their international presence.
For some, like Dow and DuPont, merging is also a method of increasing efficiency; once approved, DowDupont plans on separating its business into three independent, publicly traded companies focused on agriculture, material science, and specialty products.
A Real Impact
The reason why it’s important to understand these changes in the agricultural industry lies within the inherent importance of the industry itself. While farming may seem like an outdated occupation to some, it’s an essential piece of our economy that impacts every person on earth.
When things change in the agriculture industry, things change in the entire food supply chain. Consumers might not realize how much these companies matter, but basically anyone who eats food in North America interacts with Monsanto on some level on a day-to-day basis.
Critics of these deals will point to food safety concerns and anti-competitive business practices that can harm consumers; proponents of these deals will assert their importance for maintaining healthy businesses. Regardless of which side of the debate you happen to fall on, it’s important to be paying attention.
For more coverage of the Bayer-Monsanto deal, check out the latest episode of the Zacks Friday Finish Line podcast:
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BAYER A G -ADR (BAYRY): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
SYNGENTA AG-ADR (SYT): Free Stock Analysis Report
MONSANTO CO-NEW (MON): Free Stock Analysis Report
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