Saturday, May 21, 2016

High risk: Bayer wants to take Monsanto – FAZ – Frankfurter Allgemeine Zeitung

Gewagtes business. At a takeover battle, Bayer should not get involved

“evolution not revolution”, with this slogan of his predecessor Marijn Dekkers, the new Bayer CEO had introduced. Bayer will not suddenly go under his direction in a completely different direction, Werner Baumann assured a few days before the inauguration in May. A possible bid for the seed specialist Monsanto he expected there already have had in mind. True, a merger with the Americans would not be a change of direction. But with several billion-euro acquisition, the evolution was taking place in fast motion.

Brigitte Koch author: Brigitte Koch, business correspondent in Dusseldorf.

background of talks between Bayer and Monsanto management, the huge transformations in the global market for crop protection and seeds. Until recently, the whole agrochemical sector of six international companies has been largely determined. After the agreed merger between the two chemical companies DuPont and Dow Chemical are now only five Great that dominate the market. Ironically, the management of the targeted by Bayer geratenen Monsanto Group was that triggered the current wave of takeovers in the past year. The Americans had tried to Swiss competitor Syngenta – now the number two in the industry – to take over. Off flashed. Later, the Swiss were willing to sell to the Chinese state-owned company ChemChina to.

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Such a tight spot advised of fearing to its leading industry position Monsanto Group was soon brought as a possible prospect for the agricultural chemicals business of Bayer into play. However, Leverkusen see this business as an integral part of their “Life Science Group”. Therefore, the advances now go in the reverse direction across the Atlantic. The fact that the takeover carousel could come to a halt so soon is unlikely. Bayer has a long way to. And the financially strong chemical company BASF, the smallest player in the oligopoly of five agro chemist, not even cracked. Even on the question in the space, whether the Ludwigshafen will also provide for Monsanto. Finally, they maintain strong business relationships with the Group of St. Louis

Cyclical business with the field

The business is in the field is cyclic. it is cyclical and dependent on the weather. Recently made to create the long-kissed high growth provider of crop protection and seeds sharp drop in grain prices. A negative factor is that large agricultural markets in Latin America, especially Brazil, stuck deep in recession and demand have throttled. Nevertheless, this industry has good prospects, because he served an important megatrend: Feeding a growing world population with shrinking acreage. Crop protection not only makes the crops fail rich. Seed-innovations can make plants more resistant to drought or flood.

Because of this long-term growth opportunities to the agribusiness be expanded according to the ideas of the Bayer management. If the acquisition of Monsanto succeed, would this segment of sales, on par with the pharmaceutical business around prescription and non-prescription medicines. The industrial logic by a merger is therefore understandable. Bayer is strong in the protection of plants against fungal infection, pests and weeds and has a comparatively small seed business. At Monsanto, it is vice versa. Regionally, the two companies could complement each other well. Too high antitrust hurdles will therefore not be seen by the professionals.

incalculable risks

However, a transaction involves this volume incalculable risks and binds immense managerial capacity. Not by chance the stock market reacted very nervously to become a certainty takeover rumors. Why Bayer toying calculated with a candidate who enjoys a grotto bad reputation for various reasons and goes straight through economic turbulence? The inventor of the with potential health risks brought in connection weedkiller glyphosate agent or provider of genetically modified seeds is the focus of political discussions again and right now? How to make a group integrate smoothly, in which the set of values ​​so different sounds than in Leverkusen?

And finally means a Takeover with last rated more than 37 billion euros on the stock exchange company a huge financial effort. Bayer enjoys an A rating secured good grades in the capital market. but still there are about 16 billion debt as long-term consequences of the acquisition of the business in prescription-free means of Merck in the balance sheet. The purchase would necessarily sales of other businesses, investments and possibly an increase in capital. It is still unclear how the Monsanto management and the rest of the industry to respond to the preliminary offer. In a takeover battle, Bayer should certainly not involved.

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