Bayer's Monsanto acquisition to face politically charged scrutiny

Wed Sep 14, 2016 3:38pm EDT
 
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* Bayer agrees $128 per share cash bid to buy Monsanto

* Merger "not a slam dunk"

* Changing political landscape could pose challenge

By Diane Bartz and Greg Roumeliotis

WASHINGTON D.C./NEW YORK, Sept 14 (Reuters) - As the global agricultural sector races to consolidate, Bayer AG's $66 billion all-cash deal to acquire Monsanto Co will test growing political and consumer unease in the United States and abroad over the future of food production.

Bayer's pesticide-focused agricultural business has few overlaps with Monsanto's dominant seed franchise, according to the companies' executives. Still, marrying two of the world's top farm suppliers, at a time when rivals are also merging, is fueling concern over fewer players competing in the $100 billion global market.

Monsanto and Bayer "have chosen to do a deal in the year of merging dangerously," said David Balto, a former policy director at the U.S. Federal Trade Commission. "They are in for a tough time."

U.S. Senate Judiciary Committee Chairman Chuck Grassley has called a hearing next Tuesday to scrutinize the wave of consolidation. Farmers in Iowa, the Republican senator's home state, are worried that seed and chemical costs are rising while a global glut of grain has pushed prices close to their lowest levels in years. Farm incomes have plunged.

Monsanto agreed to sell itself to Bayer for $128 per share in cash, yet its shares were hovering around $107 on Wednesday, reflecting the significant regulatory uncertainty surrounding the deal in the minds of investors. Bayer has agreed to pay Monsanto a $2 billion breakup fee if regulators thwart the deal.   Continued...