Could this be one of the biggest potential mergers yet?

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Posted in:Uncategorized|June 9, 2016 | Join the mailing list

American genetically modified (GM) crops giant Monsanto recently rejected a $62 billion (£42.2 billion) takeover bid by German drug and chemicals company Bayer, calling the $122 per share offer “financially inadequate”.

Despite its rejection of this initial offer Monsanto has indicated a willingness to consider increased offers. As such, the pressure is now on Bayer to up its game. Although a number of Bayer’s shareholders have voiced criticism against any further increase, by all accounts it won’t be long before a higher figure is on the table.

Agreeing a price is just one of many obstacles which will be faced by both companies in the event that they decide to pursue this merger. So what else stands in their way?

The main hurdle is getting past competition and antitrust regulations. A merger of this scale, which would create the world’s biggest agricultural supplier, will be heavily scrutinised by regulators around the globe due to fears it could eliminate competition within this particular sector.

In terms of the GM crop industry this is the latest in a string of high value, high profile mergers. Following the $130 billion merger of Dow Chemical and Du Pont in December 2015 and the ongoing $43 billion takeover of Syngenta by ChemChina, numbers of global farming suppliers have dwindled and the sector is already becoming affected as a result.

Should the Bayer-Monsanto deal go ahead, the major global players in the GM supply business will reduce from six to just three. Concerns engulf the potential impact of a merger of this scale which is likely to reduce competition and ultimately lead to a dangerous combination of higher costs and fewer choices for farmers.

According to The Financial Times US crop prices have more than halved over the past three years, putting immense pressure on farming incomes and making farmers particularly vulnerable to higher prices for staple inputs such as seeds.

The approach taken in considering whether mergers are suitable for clearance differs from one jurisdiction to the next. Whilst the US adopts a holistic approach when considering simultaneous deals at any one time, the European Commission tends to operate on a first come, first served basis. According to the Financial Times, China on the other hand subjects all deals to an anti-monopoly review by a body under the Ministry of Commerce: ‘Mofcom regulators solicit feedback from Chinese state-owned enterprises before ruling on international mergers, a process that can take months.’

Another major concern here is the impact that genetic engineering can have on the environment. Worries include a lack of natural biodiversity and the risk that disease and unpredictable weather will impact on food supplies. These worries will not disappear quickly in the event that this merger goes ahead. Genetic modification is a highly controversial area of scientific innovation which has faced immense criticism in recent years.

On 21 May environmentalists in 40 countries across the world attended the fourth annual ‘March against Monsanto’ to protest against the so-called poisonous effects of GM produce. Whether the peoples’ voices will be taken into account by regulators is yet to be determined. We can however expect negotiations to be ramped up by these two corporate giants in the coming weeks.

To find out more about the issues raised in this post, or to discuss any queries regarding mergers and acquisitions get in touch with our Corporate and Commercial team on or call +44 (0) 161 829 2599.
The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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