Bayer-Monsanto Acquisition: Who Wins?

Illustration by Maddy Angstreich

Illustration by Maddy Angstreich

On September 14th, Monsanto announced that it had agreed to sell itself to Bayer for $66 billion in cash, the largest-ever all-cash acquisition to date. Monsanto, a St. Louis based company, is the world’s largest seller of seeds and the leading producer of GMOs. Bayer, a German company focusing on pesticides in agriculture, is a similar powerhouse in Europe. The company employs 102,000 people, earns $41 billion in yearly revenue, and also sells a variety of other products, including medications (such as Aleve), plastics, diagnostic imaging products, and health products for animals. Both companies claim that the acquisition is a step in the right direction for the industry and for consumers, but weeks after the announcement, multiple groups and powerful individuals have spoken up criticizing the merger. While Monsanto has always had its critics (some call it “Monsatan”), what are the various pros and cons for those involved, and who really does benefit from the deal?

It seems that while these companies themselves will benefit, as well as banks, consumers and farmers will lose out from the deal. Monsanto in particular had been struggling in recent years, and Bayer will benefit long-term even if they will be in debt for the time being. However, farmers will see reduced options and be forced to pay higher prices for seeds, which will raise prices in grocery stores. In addition, the effects on the environment are not yet completely known but may eventually pose harms. The following pro-con table addresses other repercussions of the deal:

Pros Cons
Bayer “can offer a compelling value proposition … combining the strengths of the two companies in seeds and crop protection” according to Radhakrishnan Gopalan, associate professor of finance at Olin Business School. Increase political/consumer worries in the over future of food production → combined have greater ability to lobby governments
Improve status in U.S., Europe, Asia Mergers cause companies to focus less on expanding in smaller markets like Africa
Increases earnings, save $1.5 billion/year in overlapping areas: soybeans, canola, cotton seeds Duopoly in seed (Bayer/Monsanto and Dow) and chemicals (Syngenta and Bayer/Monsanto) → less innovation
Morgan Stanley receives $120 million if the deal closes: second-largest deal fee for a single bank on record, Ducera receives $35 million if deal closes Loss of competition increases seed prices for farmers (typically 2x conventional seed) and for consumers at the grocery store e.g. soy milk
Missouri governor Jay Nixon to travel to Bayer in Germany to ensure Missouri’s workers and economy benefits, Seeds & Traits and North American HQ in STL 2.5 billion impoverished food-production workers globally (and U.S. farm economy already weakened), including small-scale farmers, puts these workers more at risk
Monsanto and Bayer claim “GMO is all about science — and it is a relevant tool in the toolbox to fight hunger in the world” Monsanto actively tries to ensure that farmers must return to the company year after year to buy new seeds
WHO and U.S. FDA vouch for safety of biotech crops despite consumer concerns GMOs cut down on natural biodiversity and expose food supply to disease
Stronger seeds provide benefits: stronger pest resistance, streamline weed control, more efficient harvests around the world e.g.

Jim Zimmerman

Monsanto seed traits in 80% of corn and more than 90% soybeans grown in the US → deplete soil structure/resilience, runoff of pesticides and fertilizers into waterways
Not foregone conclusion that deal will limit farmer choice, “might allow Bayer to put more of Monsanto’s seeds in their variety … or…might choose to produce less varieties” Limits farmers’ choices in seed purchasing, seeds sold with multiple traits and farmers forced to pay more for seeds with unneeded traits, more difficult to tailor to climate
Monsanto wins: company has been attempting to restructure and morale low, problems with product lines and future growth opportunity bleak More complex/diversified companies are harder to manage, sends message that company’s existing operations “less profitable”  

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