FRANKFURT, Germany – 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.
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.
Bayer said Monday the all-cash offer values shares of Monsanto at $122 each. That compares with a closing price Friday of $101.52 and is 37 percent higher than the closing price of $89.03 on May 9, the day before Bayer made a written proposal to Monsanto.
Bayer says that 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.
Another reason: Some investors may have bought Bayer due to its primary focus on pharmaceuticals and might not be so interested in getting a stake in a seed company.
Not only that. Buying an outside business sends a subtle message that the company’s existing operations are “less profitable,” Grote said.
He said the 12 percent drop in Bayer shares was larger than the usual 4 to 5 percent dip seen after a takeover announcement.
The pluses of the deal must have seemed stronger to Bayer CEO Werner Baumann. But “it’s on the negative side, if you add up the pluses and minuses,” said Grote.
But some jobs probably have to be lost somewhere to achieve the advertised savings, Grote said. Neither company offered any detail on that issue.
The question is whether the company would become so dominant that it could hike prices.
Analyst Ulrich Huwald at Warburg Research said 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. Antitrust regulators will scrutinize the deal to see whether it means less competition.
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