Tag / Bayer

by Frank Maduri

Bayer Announces End To Monsanto Name After Merger

The mega merger between Bayer and Monsanto was approved last week by the U.S. Justice Department ending months of anti-trust scrutiny. Bayer will have to sell off an unprecedented $9 billion in industry assets in order to clear the regulatory hurdles and the deal is expected to close on Thursday.

The news on Monday was that Bayer will end the Monsanto name after the merger due to the negative public image it has with consumers. The news is not surprising given the backlash Monsanto has received for years from the American public and the farming industry.

The news that the merger was going to move forward is a surprise to many people, the companies are both huge and have very diverse product portfolios. However, those product portfolios are clustered in the same types of industries especially when comparing the agriculture products holdings of both companies.

Therefore, that necessitated the big sell-off of assets by Bayer to make this merger happen. The precedent for a merger this large to actually be approved will have a tremendous impact on future M&A activity.

The Bayer – Monsanto merger will clear the path for mega-mergers to take place in other industries in the future. This is a merger that makes Dow-DuPont look small and that is a frightening prospect.

In my view I think the “Big Pharma” industry and the major media companies are going to try to capitalize on this merger with attempting to push through M&A proposals of their own in similar scale. The biotech field could also use this merger as an example of precedent for their own consolidation activity.
Furthermore, this merger between two titans in the agricultural industry will have an impact on the Disney bidding war with Comcast over the remaining assets of 21st Century Fox. That is a big decision that federal regulators will eventually have to make which will have an impact on the consumer who spends time watching TV or movies.

The Bayer – Monsanto deal is far more significant because, even though the Monsanto name is being erased from history, the products they manufacture will remain. The brand names such as Roundup will remain active and the merger with Bayer will not change anything, it is business as usual. This is bad news for the consumers, the farmers, and just about everybody.

Monsanto has built a negative public perception and an even worse brand image on the unabashed manufacturing of pesticides, herbicides, weed killers, and GMO containing seeds for food crops. The company has continued to make products that have been linked to certain cancers, autoimmune diseases, asthma, autism, and a host of other maladies.

The perception of Bayer in the U.S. is one that largely is shaped by the eponymous brand name of aspirin that is very popular as well as Alka Seltzer and some other branded products in the drug store channel. Those brands enjoy a largely positive image in America, and in my conversations with many people about this topic another theme came to the surface.

That theme is that German companies have a perception of integrity and for producing goods of high quality. The people I spoke with had the impression that Bayer would “turn around” Monsanto and that European influence would be for them to start making organic, environmentally friendly, and non-GMO containing seeds.

Unfortunately, from all the public statements we have from Bayer in Germany that will not be the case in this merger. They plan on keeping the U.S. headquarters for the new conglomerate in St. Louis, and they plan to continue to make those same products that Monsanto is producing currently. This is not to imply either that Bayer lacks integrity or that European companies are losing that sense of common values because that would be an inaccurate generalization.

Bayer is a microcosm of society: it creates some things that make the world better and it creates some things that make the world worse. It is also a perception versus the reality, some people feel that GMOs are safe and that having a good-looking lawn is more important than not using chemicals on the grass.

That strategic direction may surprise some people, especially Americans, but it is to be expected. Bayer will inherit brands from Monsanto that make billions of dollars in revenue each year. The American consumer and the farmers lose out here because this merger creates less competition in the seed and other agricultural products areas. The American consumer loses because the GMO and genetically altered food fight just became more difficult to win.

In the end, Bayer might enjoy a positive public perception in America right now, but it remains to be seen how that might change in the months and years ahead. The name Monsanto might be retired from the ranks, and Twitter is going to take the place of Monsanto in the S&P 500 this week, but Bayer is now tied to the legacy that Monsanto has built, and it is a rather negative one at best.

Bayer has made statements that they plan to “engage the consumer in new ways” I have no idea what that means. I do know that it does not include the discontinuation of Roundup or any of the other harmful chemical products produced by Monsanto.

This merger will have a direct impact on the American food supply, on the prevalence of genetically engineered ingredients in food, and on the future of mega-mergers. The effects of this merger will be seismic and will be felt for a long time to come.

by Frank Maduri

Honeybees & Zika: The Spray That Saves Humans Kills Bees

The mainstream news cycle has featured the stories related to the Zika virus for a few months now. In the past two weeks a couple of those stories gained some rather significant importance in the overall context of the costs of fighting the spread of the virus.

The first was in South Carolina where government officials from both the state and county levels failed to warn the local beekeeping communities regarding a massive spraying they were carrying out to prevent the spread of Zika. The result was that those chemicals sprayed to kill the mosquitoes that potentially carry the Zika virus also killed about 1 million bees.

I have written previously on the importance of the honeybee to our domestic food supply and about the epidemic of entire colonies of bees dying in America. The honeybee population could ill afford a situation such as the one which took place in South Carolina.

Due to the fact that we are a reactionary society, the government there (and in other states) have stated that they will introduce protocols to give advanced notice to beekeepers in the future regarding the scheduling of these massive chemical spraying projects.
That change does not reverse the damage already done by the spraying in South Carolina for many beekeepers who lost their livelihood, and for the farming community there which is looking at lost crop yields. The lost yields are due to the honeybees being unable to pollinate because of the massive depletion in their numbers.

The lost crop yields translates into higher costs for the consumer on certain food products. The chemicals being sprayed may save humans from the greater risk of contracting the Zika virus, but it will come at a cost to the food supply. That is certainly a consequence that must be curtailed in the future.

The second story in the news cycle with an impact on this situation is the announced merger of two petrochemical giants, Bayer and Monsanto, which is going to have a profound effect on the honeybee population. This merged conglomerate will produce increased amounts of herbicides and pesticides which the honeybees will ingest during the course of pollination which can cause the death of the entire colony.

The impact of the widespread use of chemical agents such as Roundup has a detrimental impact on the honeybee population, and this merger will increase the availability of this and other products of similar agricultural use.

In fact, a study was just released which concluded that American farmers had increased their usage of this product by more than 20% from the prior years examined. The rationale is mainly from the resistance that some weeds had established when treated by other products. This will have detrimental consequences to the American food supply, as the main ingredient, glyphosate has been linked to all sorts of health issues in humans and animals alike.

In addition, the use of the Roundup product by the average consumer for lawn care has led to active lawsuits against Monsanto regarding the potential link to the spraying of the product and Non-Hodgkins lymphoma.

Some research has also indicated that insects which fed on the leaves of corn stalks sprayed with this product have died in large numbers. The merger of the two companies will only increase the marketing efforts around this and other products which will cause harm to humans.

The data behind many of these studies is both revealing and troubling at the same time. I encourage all of you to take a closer look at the impact of pesticides and other petrochemical products, GMOs, and other agricultural products which will have an impact on you and your family.

The use of these products also merits increased consideration because we need to protect the population of honeybees, or our food supply will face a crisis level situation.

I understand the need to protect the population from the potential spread of the Zika virus, but all of these chemicals and their consequences and effects should be examined more closely as well. It certainly bears close observation as the regulators make a determination on this merger and the federal government weighs the GMO labeling laws in the coming months.

by Frank Maduri

Bayer Beware: The Monsanto – Bayer Merger

I write often about mergers and corporate takeovers here on Frank’s Forum so the opportunity to offer some commentary on the largest merger of the year was an opportunity I could not miss.

In between research and drafting of other pieces I have in the pipeline, and a final draft submitted for editorial review, I was reading the mainstream coverage of this gigantic transaction on Forbes and CNN Money among others.

I am not sure what I am more surprised about: the fact that Bayer made a third attempt which was more outrageous than the first two attempts to get this deal done, or that I knew that this merger deal was going to be announced before the end of the 2016 calendar year.

I thought the Dow and DuPont proposed deal was huge and scary (which it still is) especially given the implications for the seed market. However, this move by Bayer is also very large and bold with the valuation they put on Monsanto stock ($128 per share) and the clause if the deal does not meet regulatory approval (Bayer would pay Monsanto $2 billion). All of these factors and many more make this deal the most influential merger of the year.

The total valuation when this deal is broken down means that Bayer put a value on Monsanto of $66 billion. The deal, if approved, would do two things right away: have a huge impact on the U.S. seed market where Monsanto is the top player in that marketplace and dramatically expand Bayer’s North American footprint.

American Dream or Nightmare?

The value to Bayer is undoubtedly the opportunity to enter the North American market in a top strategic position and expand upon that through other product areas and industry segments in the future. Bayer is much more recognizable in Europe and Asia than in any other areas of the world, so growth into an essential and largely untapped marketplace for some of their products was the main impetus.

In the case of Monsanto, which has been dealing with an endless onslaught of negative publicity regarding their products and GMOs, the deal makes a lot of sense when you consider that the Dow-DuPont merger looks like it is gaining traction toward approval by regulators throughout the world. That deal did hit a snag in Europe recently, but if you are Monsanto, you proceed thinking it will eventually get done and they will be a tough combined duo to compete against.

The premarket trading of Monsanto stock, as noted by CNN Money, was $104 per share and that sort of gap between that number and the merger valuation of $128, in my time of covering M&A activity usually means that Wall Street is anticipating this deal to not be approved through regulatory channels.

Bayer is thought of in America as the company that makes aspirin and Claritin, but the reality is that they are a major player in other parts of the world in petrochemicals and agricultural chemical products. They have a position in the agricultural seeds marketplace in other regions of the world as well, and from that perspective this deal makes sense.

Why Monsanto?

Although I had a strong feeling that this outcome was going to take place with regard to this merger, I still keep coming back to the question: why would Bayer want to purchase Monsanto? I understand that Bayer swung and missed at a deal for Syngenta, another major American seed manufacturer (which is in the process of being purchased by a Chinese company, ChemChina).

Monsanto has so much baggage with the P.R. nightmare over the perception of their products in the marketplace, the potential links to their products and certain cancers, and the inevitable GMO questions. It is also no secret that I hold Monsanto responsible for putting greed ahead of the health and wellbeing of people. I have read enough data and reviewed enough clinical trials to understand the effect of pesticides and herbicides on both humans and wildlife to know that my opinion of Monsanto is not very favorable, to put it diplomatically.

Bayer top executives may have felt that the Monsanto acquisition was the best pathway to getting the market share they desired in the product areas where they have synergy in order to compete with Dow-DuPont in both the North American market and the global marketplace.

Heavy Scrutiny

This deal, make no mistake about it, will be scrutinized heavily by the political powers at play here; other online news sources are already running separate stories about that aspect of this proposed merger. Bloomberg featured a story on the merger’s impact on the cottonseed industry which if the two companies joined forces they would control a staggering 70% of the market. What further complicates the deregulation of this particular market is that Monsanto sold a piece of their cottonseed business portfolio to Bayer recently to make another acquisition themselves. I am not sure who would be to purchase assets from either company in order to satisfy regulators.

The overall picture for Bayer and Monsanto joining forces is made even further complicated because they will have limited pathways to sell off assets overall because Dow-DuPont and the ChemChina deal I mentioned earlier puts all of those companies in a holding pattern as well. Those companies are not going to be undertaking any large transactions while under regulatory review themselves.

A merged Bayer and Monsanto would control an alarming amount of agricultural products and products directly related to our food supply. They would have enormous influence and power over the pricing that all of those markets are set within. In addition, they would be able to exert enormous price pressure, which could translate to cost increases that are passed along to the consumer.

The potential combined behemoth would also have a tremendous impact on the global environment through an increased number of synergies in the pesticide, herbicide, and other agro-chemical products which will have negative effects on the soil, water, and wildlife.

The potential merger of Bayer and Monsanto is, in short, bad for the consumer, bad for the environment, bad for ingredient suppliers, and bad for farmers. I hope that the analysts on Wall Street are right, and that this merger fails to meet regulatory approval.

It is a proposal with tremendous consequences on a multitude of levels which could have a detrimental impact to our society. This proposal represents greed and the unbridled pursuit of power. I am very concerned over the outcome, and I hope I have proven to all of you that you should feel the same.