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Bayer clinches $66bn Monsanto takeover in controversial deal

Acquisition of US ‘frankenstein’ foods company creates the world’s biggest maker of seeds and pesticides – but some analysts have lebelled it a ‘horror deal’

Ben Chapman
Wednesday 14 September 2016 14:42 BST
The fee is more than a fifth higher than Monsanto’s closing price on Tuesday
The fee is more than a fifth higher than Monsanto’s closing price on Tuesday (Reuters)

Bayer has clinched its takeover of controversial “frankenstein” foods company Monsanto for $66bn (£50bn) in a deal that creates the world’s biggest maker of seeds and pesticides.

The takeover, finalised today, is the largest ever by a German company and the biggest acquisition in the world this year, but some analysts have already labelled the deal a “horror story”.

The fee is more than a fifth higher than Monsanto’s closing price on Tuesday, and a full 45 per cent above the level its shares were trading at before Bayer showed an interest.

Bayer may also have to deal with a backlash over the deal. As a pioneer of genetically modified organisms, Monsanto has become a lightning rod for protest against the technology, which some environmental groups say is inadequately tested and potentially dangerous.

John Colley, a Professor at Warwick Business School who researches large takeovers said: “Apart from Monsanto’s shareholders, who have hit the jackpot, this looks like a lose-lose bid”.

“Reputational concerns become an issue for Bayer with the GM foods campaign. EU and US competition authorities will make significant demands in terms of requiring disposals and imposing trade restrictions.”

A rash of mergers in the global agricultural business means that it is now dominated by a few giant players, stoking concern that the deal could be rejected by competition authorities, or that the combined company may be forced to sell off parts of its business so it is not overly dominant.

The consolidation also leaves few buyers for any assets Bayer-Monsanto might need to sell to satisfy regulators.

Werner Baumann, Bayer chief executive, hailed the deal which he said marks a “major step forward” for its agriculture and crop science business, which includes genetically modified crops.

Genetic engineering

Monsanto has attracted criticism from environmental campaigners around the world for promoting the commercialisation of genetically modified organisms, known colloquially as “frankenfoods”.

In May, thousands of protesters across more than 40 countries took to the streets to express anger and concern at Monsanto and its central role in the increased use of pesticides and GMOs in world farming.

GMO varieties of corn and soybeans now account for more than 90 per cent of corn and soybean crops in the US, with Monsanto the dominant player.

Monsanto’s Roundup herbicide, which is classified as “probably carcinogenic to humans” has attracted much of the criticism. The herbicide kills most crops, apart from those Monsanto has genetically modified to be resistant to the chemical.

The company has patented the Roundup-resistant seeds, effectively giving it a monopoly – a move that critics say makes farmers overly reliant on Monsanto.

Last month Greenpeace revealed that the US firm had filed patents attempting to assert worldwide control over the breeding of certain pigs and their offspring.

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