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Agrochemical-Pharma Tie-Up Looms Large

Agrochemical-Pharma Tie-Up Looms Large

With a new bid on the table, and amid a recent move by many in the industry to consolidate, Germany’s Bayer are attempting a takeover of the American agrochemical titan Monsanto which could result in the biggest supplier of seeds and chemicals in the world.

New York, NY, USA, June 21, 2016 — Following the mergers recently involving competitors including DuPont, Dow Chemical and Swiss company Syngenta, the German chemical and drug producer is looking to make significant strides into the GM crop arena, Monsanto being noted specialists in the field.

The transaction is far from being closed however, with regulators sure to have their say first.

Monsanto revealed in a statement released to the press, “Neither the terms of the deal nor the assurances of any merger happening has been fully decided as yet.” The statement added that the board of directors will also need to green light the deal for talks to progress.

Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management commented on the news in his blog, “There is a strong possibility the deal will go though. Both companies are playing catch up with other big competitors in the field consolidating their holdings recently. The only stumbling block could be the regulators.”

After rumours recently that Monsanto had been courted by both Bayer and another German chemicals giant BASF, Bayer confirmed they have been involved with talks saying it had “sat down with members of the Monsanto board informally to discuss a proposed combination of the companies.” Following the announcement, Bayer share prices took a 6 percent hit, which may spark a backlash from their shareholders.

Bayer is currently the second biggest supplier of crop chemicals after Syngenta, who were recently acquired by ChemChina, pending regulatory approval. Monsanto also attempted to buyout the Swiss firm last year but were rejected.

A ground breaking merger took place in December 2015 when Dow Chemical, an American chemical multinational head quartered in Michigan, and DuPont came together forming a new $140 billion entity.

Tie-up concerns

In an already embattled agricultural industry where major commodities are underperforming, farmers have been losing income and big suppliers like Bayer have also felt the squeeze on their annual profits. As a result, multinational agrichemical firms have higher amounts of seeds and chemicals in stock meaning large scale price cuts and an increased need for efficiency.

It’s thought regulators will be looking at the proposed merger very carefully as concerns have been raised the tie-up could have a dramatic effect on competition in America. Farmers are also worried that such deals could lead to price increases, fewer choices and too much power for any new entity that holds all the cards.

Arin Takashi
Nikko-Desjardins Asset Management
Tokyo, Japan

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