Bayer, Monsanto global merger to create $2.83-bn firm in India

However, analyst see limited impact of the merger in India's seed, agro chemicals and crop science sector

Following a consolidation trend globally in the agro chemicals and seed sector, Bayer and Monsanto announced a merger on Wednesday, where the former will pay 44 per cent higher price to Monsanto shareholders. While both companies are present in India and their Indian arms are listed, the share prices of both went up on the day with Monsanto India surging 9.9 per cent, while Bayer Crop Science surged 1.1 per cent.

Analysts, however, feel there will be a limited impact of the merger on India’s seed, agro chemicals and crop science sector.

Deven Choksey, managing director, KR Choksey Investment Managers, said, “Globally, consolidations are happening as companies don’t have visibility of growth.” However, in India, according to him, seed and agro chemicals have largely grown in the generic segment.

Growth of patented products in India has been limited. Monsanto is a leader in the GM cotton seed technology. But, it announced last month that it has withdrawn an application to sell a new variety of genetically modified cotton seed in India because of concerns over the government’s alleged attempt to restrict the biotechnology business.

Monsanto India’s shareholders expect an open offer, but its valuation is being assessed as its business is smaller in India. Based on the financial year 2015-16 data, the combined entity’s sales were Rs 4,284 crore, and market cap as on Wednesday was Rs 18,973.7 crore ($2.83 billion).

According to announcement, the deal is expected to be closed by December 2017, and analysts say the open offer for Monsanto India can be expected only after that as several regulatory and anti-trust approvals would be required.

The press note issued by both the companies says, “Bayer has committed to a $2-billion reverse anti-trust break fee, reaffirming its confidence that it will obtain the necessary regulatory approvals.” This means if the merger doesn’t go through, Bayer will pay $2 billion to Monsanto’s shareholders.

In 2016 Dow Chemical and DuPont announced a merger, though the deal is yet to clear the European Union’s antitrust laws. Also under scrutiny is the planned sale of Swiss pesticide and seed maker Syngenta to China National Chemical Corp, a state-owned company that also maintains a big generic crop chemical business. This week, fertiliser giants Agrium and Potash Corp of Saskatchewan also agreed to merge.

Bayer and Monsanto held a conference call in which they said they had to get approvals from 30 countries’ regulators.

In terms of scope, Bayer has estimated that by 2050 the world’s population will grow by another three billion and per capita agricultural land availability will reduce by 70 per cent. This will require a huge increase in productivity and, “the merger will help in providing farmers high technology products to achieve higher productivity.”

Regarding India, the companies’ executives said they see tremendous growth potential, which they intend to unlock by providing farmers information through mobile technology.

MEGA DEAL
Monsanto India shares jump 10 % after global merger deal with Bayer

• Companies say Indian farmers will get information through mobile technology, help them improve productivity
• Combined Indian entities market cap as on Wednesday  was $2.83 bn
• Analysts see overall limited impact in India’s agri business sector
• The deal has to get 30 countries’ regulatory approvals

MONSANTO IN INDIA

• Mahyco Monsanto Biotech Ltd: 50:50  JV between Monsanto Holdings Pvt Ltd and Maharashtra Hybrid Company Ltd (Mahyco) — It has sub-licensed the Bollgard Ii and Bollgard Technologies (Bt) to 28 Indian seed companies, wach of whom has introduced the Bollgard Technology into their own germplasm
• Monsanto Holdings Pvt Ltd (Mhpl): 100 per cent subsidiary of Monsanto Company; holds 26 per cent stake in Mahyco — Markets Paras Cotton Hybrid Seeds with Bt Cotton Technologies, and Seminis Vegetable Hybrid Seeds
• Monsanto India Ltd: A subsidiary of the Monsanto Company, USA— is the only publicly listed Monsanto entity outside the US.  Sells hybrid maize seed and round-up herbicide
• Monsanto’s Total Staff Strength In India: over 900

MONSANTO'S FACILITIES IN INDIA
Bengaluru: Research centre
Hyderabad: Seed processing unit and seed testing lab
Silvasa: Chemistry plant

• Plus seven breeding stations