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Bayer completes $63-billion Monsanto takeover

AFP|Updated: Jun 07, 2018, 06.58 PM IST

FRANKFURT AM MAIN: German chemicals and pharmaceuticals giant BayerNSE 0.00 % said Thursday its two-year pursuit of US-based MonsantoNSE 1.01 % was over, as the two firms signed off a $63-billion merger deal.
“Shares in the US company will no longer be traded on the New York Stock Exchange, with Bayer now the sole owner of Monsanto Company,” the German firm said in a statement.

Here’s what you need to know about the $63-billion megadeal:

– Heroin and Agent Orange –
Founded in Germany in 1863, Bayer is still best known for making aspirin. More infamously, it briefly sold heroin in the early 20th century, marketed as cough cure and morphine substitute.
During World War II, Bayer was part of a consortium called IG Farben that made the Zyklon B pesticide used in Adolf Hitler’s gas chambers.
Through a series of acquisitions over the years, Bayer has grown into a drug and chemicals behemoth.

It reported revenues of 35 billion euros ($41 billion) last year and employs nearly 100,000 people worldwide.
Monsanto meanwhile was established in St. Louis, Missouri in 1901, setting out to make saccharine.
By the 1940s, it was producing farm-oriented chemicals, including herbicide 2,4-D which, combined with another dangerous chemical, was used to make the notorious Vietnam War-era defoliant Agent Orange.
In 1976, the company launched probably its best-known product, ..the weed killer Roundup.
In the 1980s, its scientists were the first to genetically modify a plant cell. Monsanto then started buying other seed companies and began field trials of GM seeds.
It eventually developed soybean, corn, cotton and other crops engineered to be tolerant of Roundup.
Today, Monsanto boasts annual sales of some $15 billion and over 20,000 employees.

A keen suitor –
In an industry preparing for a global population surge with billions more mouths to feed, Bayer was keen to get its hands on Monsanto’s market-leading line in GM crop seeds designed to resist strong pesticides.
It was also lured by Monsanto’s data analytics business Climate Corp, believing farmers will in future rely on digital monitoring of their crops.
The tie-up comes amid a wave of consolidation in the agrochemicals industry, spurring Bayer to become a bigger player if it did not want to get left behind.
But Monsanto wasn’t easily wooed, and Bayer had to increase its offer three times before the US rival finally agreed to a deal at $128 per share in 2016.

High price to pay –
The takeover, the largest-ever by a German firm, comes at a high cost to Bayer.
As well as the eye-watering price tag, Bayer must give up much of its seeds and agrichemical business to satisfy the competition concerns of global regulators.
Those divestitures have gone to none other than Bayer’s homegrown rival BASF, making it the unexpected beneficiary of the mega-deal.
Bayer’s sacrifices mean the takeover will be less lucrative than expected, with annual savings now forecast to amount to $1.2 billion from 2022 onwards — some 300 million less than initially thought.

– Goodbye ‘Monsatan’ –
Hoping to ditch Monsanto’s toxic reputation, Bayer will drop the company’s name from its products after the takeover.
Dubbed “Monsatan” and “Mutanto”, the US firm has for decades been targeted by environmental groups, especially in Europe, who believe that GM food could be unsafe to eat.
Campaigners also abhor Monsanto’s production of glyphosate-based Roundup, which some scientists have linked to cancer.

Friends of the Earth, which has labelled the Bayer-Monsanto merger a “marriage made in hell”, said their protests will now be turned on Bayer so long as it keeps up Monsanto’s practices.

– What does this mean for farmers and consumers? –
The Bayer-Monsanto union follows last year’s merger of US companies Dow and DuPont and the tie-up between Swiss-based SyngentaNSE 0.00 % and ChemChina.
These three giant corporations now control more than two thirds of the global market for seeds and pesticides — although Bayer’s sell-offs have allowed BASF to become a sizeable fourth competitor.

While Bayer has been able to ease regulators’ worries, critics say too much power is now in the hands of just a few players, potentially pushing up prices for farmers and limiting choices.
Bayer has vowed to continue developing some of Monsanto’s most controversial activities, including the crop protection technologies it insists are needed to meet growing food demand.
It has however promised not to introduce GM crops in Europe

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The Bayer-Monsanto Deal Won’t Eat the Cannabis Industry. Yet.

Submitted by Marijuana News on Fri, 09/16/2016 – 08:10

 

The news that Monsanto is being bought by Bayer probably won’t be well received in the cannabis sector. The deal brings together two research powerhouses that, reportedly, have long eyed cannabis as a possible new business. The worry is that the combined firm will have the financial and political influence to do to cannabis what it has already done to corn, tobacco, and other cash crops—namely, use pricy patented cannabis seeds (Roundup Ready Blue Dream, anyone?) that favor large-scale operators and rigidly control how all cannabis farmers farm. The merger, in other words, could be the first step toward Big Cannabis.

In truth, it’s far from certain just how worried “small cannabis” should be. On the one hand, Bayer clearly has designs on the multi-billion-dollar cannabis market. The German firm has been working with GW Pharmaceuticals on a cannabis-based medicinal extract since 2003. And while Monsanto says it “has not and is not working on GMO marijuana,” the company will soon enjoy access to Bayer’s cannabis expertise, which, given Monsanto’s control-through-litigation tactics, might lead one to imagine some pretty bleak scenarios.

That said, it’s hardly clear that this merger makes those scenarios—or Big Cannabis generally—any more plausible.

First, as a practical matter, the merger itself is still just a theory. Monsanto’s shareholders accepted Bayer’s $66 billion buyout offer, but the mega-dealneeds approval from American and German regulators. And given the firms’ massive market share (it would control more than a quarter of the world’s seed and fertilizer business) on top of strong antitrust sentiment worldwide, that approval is hardly assured. And, as a side note, 60 to 80 percent of all mergers fail.

Second, even if approved, a Bayer-Monsanto enterprise likely wouldn’t launch a cannabis product until federal prohibition is lifted. It’s the same reason Big Tobacco hasn’t completely taken over cannabis, despite a decades-old interest in doing so: Massive corporations need massive volume sales, which, in the case of cannabis, is hard to do without a fully open national marketplace. Yes, some in Big Pharma are now reportedly lobbying in favor of legalization—but there’s hardly a sector-wide consensus, as the recent anti-legalization effort by Insys Therapeutics underscores.

Third, even if the feds legalized cannabis tomorrow, a Bayer-Monsanto mega-corporation probably won’t result in any retail cannabis products for some time. It’s true that Bayer has already partnered with pharmaceutical firms that are doing trials of cannabis drugs. Also, Monsanto may be less than candid when it says it hasn’t (yet) tinkered with cannabis’s genetics. But however far along their respective cannabis research efforts are, turning research into commercial product takes years, especially in a market as heavily regulated and politically fragmented as cannabis will continue to be.

Fourth, when it comes to the rise of Big Cannabis, a Bayer-Monsanto merger would merely add to a process that is already well underway. The seed and drug industries are hardly the first mainstream sectors to try to colonize cannabis. Since the start of state legalization, nearly every outside industry with a conceivable cannabis play—tobacco of course, but also food and beverage, clothing, health & wellness, tourism, and Silicon Valley venture capital—has been scrambling to bring the cannabis sector out of the margins and into the mainstream.

More to the point, as the cannabis community itself has matured, it has been moving incrementally toward a business model that, if one didn’t know better, looks surprisingly corporate. For example, with competitive pressures squeezing retail margins, a steady stream of independent retailers have been selling out to larger, more cost-efficient retail chains. This is especially the case in Colorado. Likewise, in a mirror image of the larger faming business, struggling small-scale cannabis farms are being consolidated into larger scale operations whose managers (and investors) are anxiously adopting any method, or technology, that might help them boost output and lower costs. Five or ten years from now, will those farms turn their noses up at a genetically engineered cannabis strain that promises more bang for the buck? More to the point, will their customers?

And therein lies the rub. It may be tempting to see mergers like this one as a threat to the traditional cannabis community, a culture that values a diverse mix of independent small-scale operators. Make no mistake: A merger of this magnitude does promise big changes for global agriculture. But in a cannabis sector that is looking more and more like any other consumer sector, the larger factor may the changing priorities of the cannabis consumer. In the end, the customer’s dollar determines which products—and companies—succeed or fail.

Authored By: 

Leafly

Region: 

United States

Germany

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