As Monsanto’s board reviews Bayer’s unsolicited, non-binding $62 billion acquisition proposal, it’s likely the private equity world is also watching with interest.
“There will be divestitures [in these situations] which PE could easily pick up. So the question of whether new players can come into this space is a big one,” said Tom Laurita, chief executive of biologicals start-up NewLeaf Symbiotics and former chief of Monsanto’s USSR operations.
“The larger these merged ag companies are, the more barriers to entry they’re throwing up, so that is an open question: whether those players who want to enter the space, whether it is through divestiture [by big ag] or through new technology, are going to be able to take advantage of the opportunity presented by the M&A activity. I don’t really know the answer but there are a lot of interested parties [watching this space] right now,” he said instead.
Laurita kept any further observations to himself, waiting, like others in the agricultural space, to see how the offer plays out. But Monsanto is also staying tight-lipped.
“There is no assurance that any transaction will be entered into or consummated, or on what terms,” said a press release from the company on Thursday. It made clear no further comment would be available until after a board decision.
A takeover by Bayer would create the world’s largest agricultural commodities and input business. The Bayer bid follows an attempt by Monsanto to create a merger with Syngenta, which the Swiss business rejected last year. Monsanto argued at the time that consolidation would lower the cost of agricultural inputs for farmers.
However, another source close to the deal has told Agri Investor the St Louis-based company is getting ready to fight off the German acquisition tooth and nail.
Our source said Monsanto expected that chemical ag giants BASF or Bayer would eventually make a move on the company, which has some chemical products, but has increasingly turned towards its seed business.
It is likely Monsanto would fight off a deal by arguing a merged company would have a near-monopoly on certain herbicide products and around crops like cotton, against competition regulations. If a merger took place, those would be likely areas for divestment.
Bayer’s move follows a series of mergers between chemical and seed specialists. Dow Chemicals and DuPont are set to merge after a deal was reached at the end of last year, while Swiss company Syngenta is likely to be bought out by the China National Chemical Corporation.