Bayer Monsanto deal provides potential openings for PE

The improved deal for Monsanto has investors looking out for opportunities through divestments from the companies, which will be needed for the merger to gain approval.

Bayer’s success in reaching a $66 billion, all-cash deal to take over Monsanto has some investors eyeing potential openings for private equity.

Silverfleet Capital, which recently divested from international Danish seed processing equipment company Cimbria, told Agri Investor it will be looking out for investment opportunities resulting from the merger.

“If Bayer does buy Monsanto, it will undoubtedly throw off out a few bits and pieces where guys like us could come in,” said Gareth Whiley, partner.

Moves towards consolidation among the world’s biggest inputs companies have investors eyeing up potential asset sales, and Monsanto and Bayer are likely to offload some of their divisions in order to comply with competition laws.

“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 then-USSR operations also told Agri Investor earlier this year.

Other observers to increasing consolidation say technological advances have also opened the way for smaller agri inputs companies to survive and compete with large corporations.

Ewan Lamont, former commercial manager for Syngenta’s ASEAN emerging markets division and now chief operating officer at inputs company Myanma Awba, said the need for larger companies to offer a full range of inputs products has opened the way for specialist businesses that can provide high quality inputs to compete with the largest competitors. He said the field would be likely to prove interesting to firms already looking at opportunities in agriculture.

The new deal reflects Monsanto’s intentions to secure its St Louis headquarters’ continued existence, as well as a significant presence based on Monsanto’s company structure in the US. Another source from the company told Agri Investor this summer that the seeds business would fight any deal that broke up the company structure entirely or threatened its headquarters.

The agreement follows the rejection of German multinational Bayer’s unsolicited, non-binding $62 billion acquisition proposal in May. If the agreed deal goes through — and it could include gaining approval in over 30 jurisdictions — the merged company will become the world’s largest agricultural commodities and input business. Whether Monsanto will keep its name for part of the business is still not decided, according to a press release.

Bayer has said it expects the deal to close next year, and that it will pay Monsanto a $2 billion break-up fee if it fails to be approved.

The series of merger agreements between chemical and seed specialists include an agreement between Dow Chemicals and DuPont struck at the end of last year, and a recent deal between the Potash Corporation of Saskatchewan and Agrium, while Swiss company Syngenta is likely to be bought out by the China National Chemical Corporation. Monsanto also attempted to create a merger with Syngenta, which the Swiss business rejected last year.