Bayer/Monsanto talks more likely to result in sale than JV - MergerMarket
Talks between Bayer [ETR: BAYN] and Monsanto [NYSE:MON] would most likely result in a sale of the German chemical company’s crop-science division rather than a joint venture or partnership, according to a source familiar with the situation.
It was reported late last week that Bayer was in talks with Monsanto over a possible sale or joint venture around Bayer CropScience.
The talks are still at preliminary stage and there is no formal process yet, the source said. A sale would result in a better value for the German company Bayer, he added.
A spokesperson for Bayer declined to comment.
Monsanto has the financial fire power for an outright acquisition of the unit, which could reportedly be worth more than USD 30bn. The US group last year offered in the region of USD 45bn to acquire Syngenta [VTX:SYNN], but withdrew after continued opposition from the Swiss company.
Most major seeds and crop protection providers are talking to each other following the two recent mega mergers of Syngenta/ChemChina and Dow Chemical [NYSE:DOW]/DuPont [NYSE:DD], one sector banker said.
Reports last month had also flagged the possibility of Bayer and BASF [ETR:BAS] merging their respective agrochemicals units.
Monsanto is expected to make a move, this banker added, as the group is keen to focus on growing in the seeds business and needs to compete more efficiently.
There is a lot more value in Bayer CropScience versus BASF in terms of synergies and what it could bring to Monsanto, the source said in response to whether Monsanto may also be considering BASF’s agrochemicals unit.
Bayer is more of an innovator, the source said. Monsanto is clearly after these kind of high-end segments, as demonstrated by its relentless pursuit of Syngenta, which has similar high-end seeds treatments, he claimed.
But, a second sector banker did not rule out a tie-up between BASF and Monsanto. BASF is more eager to make a move and might approach Monsanto, this banker said.
Bayer CropScience has operations in crop protection, seeds and non-agricultural pest control. The unit reported EUR 10.4bn (USD 11.7bn) sales and EUR 2.42bn adjusted EBITDA last year, as reported.
A tie-up between Bayer and Monsanto is likely to create some antitrust issues, the source and the two bankers agreed. The companies’ activities mainly overlap in the production of cotton, weeds and vegetables, the second banker said.
Any tie-up with Monsanto would involve some divestments, the bankers and source said. But this will not stop Monsanto, the source said, adding that a deal of this kind is paramount to Monsanto, which will likely have a divestment plan if needed to satisfy the regulators.