Rush for ag-chem megadeals clogs regulatory path, worries farmers

Fri May 20, 2016 7:20am EDT
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By Diane Bartz and P.J. Huffstutter

WASHINGTON/CHICAGO (Reuters) - As Bayer AG joins the agricultural sector's scramble to consolidate, its bid for Monsanto Co may be a tipping point for U.S. farmers, federal lawmakers and regulators concerned the tie-ups may harm the farm economy.

If Monsanto accepts Bayer's unsolicited offer, experts say, the deal would inevitably trigger a review by federal antitrust regulators. But that review would be slowed down by the fact that two other major mergers of the companies' rivals are also underway.

Farmers and lawmakers say a Bayer-Monsanto deal could be one too many for an agrochemical and seed market where prices have risen and, say critics, innovation has suffered after it shrank to just six large players.

Jeffrey Golman, vice president at Mesirow Financial, said the sheer size, scope and number of these deals would inevitably slow regulatory reviews and potentially complicate the process of finding buyers for divested assets.

"I can't imagine that this could get done before the third or fourth quarter of next year," he said.

A global downturn in grain prices and a strong dollar have reduced U.S. farm income and prompted farmers to cut spending. That has eaten into sales of the big six agrochemical and seed companies and now they are trying to shore up profits through mergers and partnerships.

DuPont and Dow Chemical Co agreed in December to an all-stock merger valued at $130 billion at the time, in a first step toward breaking up into three separate businesses. In February, state-owned ChemChina agreed to pay $43 billion for Swiss seeds and pesticides group Syngenta AG.

Late on Wednesday, Monsanto confirmed that German drugs and chemicals group Bayer made an unsolicited takeover offer, aiming to create the world's biggest agricultural supplier.   Continued...

Monsanto is displayed on a screen where the stock is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. on May 9, 2016. REUTERS/Brendan McDermid/File Photo