Some 6,666 U.S workers could find themselves out of work, thanks to Germany’s Bayer agreeing to buy Monsanto, the American high-tech genetically modified seed and fertilizer company, for $66 billion.
Bayer (ETR:BAYN), best known for its aspirin, reached a merger agreement after a months-long battle to acquire Monsanto (NYSE:MON) for $128 per share. The stunning all-cash bid won unanimous approval by both companies’ boards. The final takeover price amounts to a 44 premium over the price of Monsanto shares at the close of trading May 9, the day before Bayer made its first formal offer.
Bayer-Monsanto’s global Crop Protection and overall Crop Science headquarters will be consolidated into Monheim, Germany. The Seed & Traits and North American headquarters will remain in St. Louis, MO, and digital farming in San Francisco, CA.
The German company disclosed few details of its offer, but stated that the combining of the companies will generate an estimated $1.5 billion in synergies within three years. The word “synergies” is usually corporate-speak for huge layoffs at the acquired firm.
Monsanto has whittled down its employee head count from 25,500 a few years ago to 22,000 employees today. But the companies will have substantial overlap in functions such as sales and marketing, since both Bayer and Monsanto sell seeds and crop chemicals to the same farmers.
The Bayer-Monsanto company will have annual agricultural sales in the $26 billion range. Slashing $1.5 billion in costs will probably involve terminating about 10,000 employees worldwide. With at least two-thirds coming from Monsanto as the acquired company, about 6,666 U.S. employees will be dumped due to the merger.
From a U.S. technology transfer basis, the acquisition of Monsanto by a German company that intends to move the global Crop Protection and Science off-shore is an epic disaster. Monsanto was one of the first companies to apply Genetech’s 1970s bio-genetic research breakthroughs in drug development to agriculture. Monsanto now controls perhaps the most valuable biological patents on the planet.
Monsanto began licensing its technology in 1991, and in 1996 bought Agracetus, the first biotechnology company to create transgenic varieties of cotton, soybeans, peanuts, and other crops. Monsanto sold its chemical division and reinvested in acquisitions to become the world’s biggest supplier of seeds, with a 26 percent market share.
Scientists at Monsanto have added genes to seeds that let crops resist many of the natural forces that kept farming at the mercy of nature for millennia, achieving such exotic functions as fending off insects, surviving toxic herbicides, growing in drought conditions, and yielding oils with less saturated fat.
One of the reasons Monsanto became so successful is the U.S. was the world’s largest wheat and corn producer and exporter, with almost a 15 percent global market share. But over the last decade, the U.S. “ceded the dominant role in wheat and corn exports to the European Union, Canada, and Russia,” according to the USDA.
President Barack Obama has been blasted by American farmers for passing labor and environmental laws that have hurt U.S agricultural production. But the U.S. agricultural community’s biggest challenge was the Obama administration’s unwillingness to enforce China World Trade Organization (WTO) rules agreed to in 1994 during the Bill Clinton administration, which gave China Most Favored Nation trading rights to access to U.S. markets.
After almost eight years of watching China increasingly flout WTO rules, the Obama administration finally launched a WTO enforcement action against China on September 13, 2016 for drastically limiting U.S. farm exports to the “Forbidden Kingdom” by providing over $100 billion a year to subsidize domestic production of domestic rice, wheat, and corn.
The acquisition of Monsanto by Bayer may just be another example of how the United States may have permanently lost its world dominance in agriculture.
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