Bayer explores potential bid for Monsanto Co

13 May 2016


German chemicals and drugs company Bayer AG is exploring a potential bid for Monsanto Co, the world's largest supplier of seeds and farm chemicals.

Bayer has held preliminary discussions internally and with advisers on an offer for Monsanto, in a deal that could be worth as much as $65 billion.

Earlier, Monsanto had been doggedly pursuing Switzerland's Syngenta, the largest player in the agrochemicals business.

A bid for Monsanto would be the latest in a wave of consolidation in the chemical and agribusiness industry. In December, Dow Chemical Co and DuPont Co agreed to a $130-billion merger of equals, and in February, Chinese state-owned China National Chemical said that it would acquire Syngenta for $43 billion.

Leverkusen, Germany-based Bayer has a market value of $90 billion, while Monsanto has a market cap of $46.3 billion. The combined company had 2015 annual revenue of $67 billion.

St Louis-based Monsanto is the world's largest seed company and a leading producer of genetically engineered seed and Roundup, a glyphosate-based herbicide.

It operates in two segments - seeds and genomics consisting of the global seeds and traits business, biotechnology platforms and precision agriculture; and agricultural productivity comprising crop protection products and lawn-and-garden herbicide products.

Bayer, the inventor of Asprin, operates in four segments - pharmaceuticals, consumer health, crop science, and animal health.

Its Crop Science Division has businesses in seeds, crop protection and non-agricultural pest control, which is operated into two operating units - Crop Protection / Seeds and Environmental Science.

Crop Protection / Seeds markets a broad portfolio of high-value seeds along with innovative chemical and biological pest management solutions, while Environmental Science focuses on non-agricultural applications, with a broad portfolio of pest control products and services for areas ranging from the home and garden sector to forestry.

In 2002, Bayer AG acquired Aventis (now part of Sanofi) CropScience and merged it with its Crop Protection unit to form Bayer CropScience.

Belgian biotech company Plant Genetic Systems became part of Bayer through the Aventis acquisition.

Also in 2002, Bayer AG acquired the Dutch seed company Nunhems, which at the time was one of the world's top five seed companies.

Bayer could sell its 69 per cent stake in its plastics unit Covestro AG and its animal-health business to make the acquisition work, said Colin Isaac, a chemical analyst with Atlantic Equities in London.

Bayer could pay for some of the deal in cash with €15 billion raised in debt, Jeremy Redenius, an analyst at Sanford C. Bernstein & Co., said in a note. It could also issue additional shares and sell assets including the animal health unit, he said.

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