Bayer-Monsanto merger will be a winner: Study

The $66 bn deal will create the only player with dominant positions in agrichemicals & seeds

Last Updated : Jan 16 2017 | 3:26 PM IST

German giant Bayer’s $66 billion acquisition of Monsanto is a winning deal that will create a global player with strong positions in key areas of agriculture innovation, including crop and seed traits, synthetic agrochemicals, and biologicals, according to Lux Research. However, the combined entity will be weak in Digital Ag, or precision agriculture.

Of the recent spate of megamergers in agriculture, the Bayer-Monsanto deal stands out not only because it is the largest, but also because it will create a company with significant market shares in both agrichemicals and seeds. The new agriculture landscape will be even more consolidated as the traditional ‘Big Six’ become the ‘Behemoth Four’ - Bayer-Monsanto, Dow-DuPont, Syngenta-ChemChina, and BASF.

“Bayer wins by acquiring Monsanto’s diversified capabilities in crop and seed traits, while the U.S. company gains Bayer’s robust IP portfolio in synthetic agrochemicals. Together, the combined entity will be much stronger than other entities in the Behemoth Four but will be lackluster in their Digital Ag portfolio,” said Laura Lee, Lux Research Associate and lead author of the report titled, ‘Does Bayer’s acquisition of Monsanto make sense?’.

Having both Monsanto’s Roundup and Bayer’s Liberty brands under the same roof will give the combined entity a huge competitive advantage in agrochemicals and seeds. Monsanto’s diversified relationships across multiple genome editing technologies will give the duo an advantage in this space.

According to Lux Research, Digital Ag is an obvious weakness. While Monsanto has built many Digital Ag partnerships, its approach is nonsensical. It has collaborated with many developers of unproven technologies but neglected well-validated ones - a backwards approach.

Bayer is surprisingly strong in biologicals. Monsanto is an acknowledged innovator in biologicals through its partnership with Novozymes called the BioAg alliance. But Bayer brings its own surprisingly strong biologicals portfolio, assembled through four key acquisitions – Athenix, Prophyta, AgraQuest, and Laboratorios Biagro.