You’ve probably heard the name Bayer before. You’ve taken their aspirin, used some of their medical devices in a hospital, or learned in school about how they purposely invented heroin and did some bad stuff during World War II. They’re one of the biggest German public companies, and they’re kind of a big deal
You also might have heard the name Monsanto before. After all, they’re the largest producer of (mostly genetically modified) seeds in the world, so you probably have something in your fridge and pantry that was made using their products.
For months, Bayer (pretty much a monopoly) toyed with the idea of acquiring Monsanto (also kind of a monopoly), but Monsanto balked at their offers. Today, however, Bayer announced they would be buying Monsanto to create a monstrous chemical-and-seed super-conglomerate and take over the
This can’t be good.
Monsanto and Bayer are the 500-pound gorillas in their respective fields, and they both have divisions that work work in chemical production and other related fields.
From a business perspective, both companies could combine their divisions and expertise to create better, more efficient products.
Unfortunately, both companies are universally hated for their oft-unfair and controversial business practices, like developing harmful and anti-competitive products.
Monsanto, for example, plays fast and loose with genetically modified crops, which some consumer advocates feel are not fit for human consumption.
From a financial standpoint, however, a Bayer-owned Monsanto would be crazy profitable, which is why they’re spending $66 Billion in cash to acquire them.
This comes out to $128 per share of Monsanto stock, making it the single-largest acquisition this year.
With major acquisitions like this one, there are always winners and losers if and when the proposed deal actually goes through:
Winners: Monsanto and Bayer
If the FTC and other regulators pass Bayer’s acquisition of Monsanto, Bayer will become the largest chemical and seed company in the world. They’ll be able to reduce costs by combining similar divisions and further dictating prices (and thus the markets) of their products. Sure, they’re both monopolies now, but if they combine they’ll be a…super monopoly?
Monsanto is currently trading at 106.74 (as of this writing). If this acquisition goes through, Monsanto shareholders will receive $128 for every share they own. Sure, they’ll have to pay capital gains taxes on the transaction, but that’s a small price to pay on a sizable markup.
Monsanto already has a chokehold on the seeds market in most markets, including North America. If they merge with Bayer, they’ll be in a better position to demand higher prices per seed. While major farms may be able to weather this increase, smaller, independent farmers will totally get shafted in the process.
When farmers’ costs rise, the burden is often passed on to you, the consumer. So while Monsanto shareholders and executives might see a nice payday, you might end up paying more for your fruits, veggies, and pretty much everything at the supermarket.
Thankfully, this merger isn’t going to happen overnight. The FTC will research the effect a Bayer-owned Monsanto will have on the world’s farmers, and they won’t announce their final decision for months. Still, the thought of an uber-Monsanto is frightening as all hell, and has a 70% chance of happening.
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