* Bayer agrees $128 per share cash bid to buy Monsanto
* Merger "not a slam dunk"
* Changing political landscape could pose challenge
By Diane Bartz and Greg Roumeliotis
WASHINGTON D.C./NEW YORK, Sept 14 As the global
agricultural sector races to consolidate, Bayer AG's
$66 billion all-cash deal to acquire Monsanto Co will
test growing political and consumer unease in the United States
and abroad over the future of food production.
Bayer's pesticide-focused agricultural business has few
overlaps with Monsanto's dominant seed franchise, according to
the companies' executives. Still, marrying two of the world's
top farm suppliers, at a time when rivals are also merging, is
fueling concern over fewer players competing in the $100 billion
Monsanto and Bayer "have chosen to do a deal in the year of
merging dangerously," said David Balto, a former policy director
at the U.S. Federal Trade Commission. "They are in for a tough
U.S. Senate Judiciary Committee Chairman Chuck Grassley has
called a hearing next Tuesday to scrutinize the wave of
consolidation. Farmers in Iowa, the Republican senator's home
state, are worried that seed and chemical costs are rising while
a global glut of grain has pushed prices close to their lowest
levels in years. Farm incomes have plunged.
Monsanto agreed to sell itself to Bayer for $128 per share
in cash, yet its shares were hovering around $107 on Wednesday,
reflecting the significant regulatory uncertainty surrounding
the deal in the minds of investors. Bayer has agreed to pay
Monsanto a $2 billion breakup fee if regulators thwart the deal.
The German company aims to create a one-stop shop for seeds,
crop chemicals and computer-aided services to farmers.
That was also the idea behind Monsanto's swoop on Syngenta
AG last year. The Swiss company fended off that offer
only to agree later to a takeover by China's state-owned
U.S. chemicals giants Dow Chemical Co and DuPont
plan to merge and later spin off their respective seeds
and crop chemicals operations into a major agribusiness.
If all of the deals close, three companies would control
nearly 70 percent of the world's pesticide market and 80 percent
of the U.S. corn-seed market.
Other agricultural sectors are also consolidating.
Canadian fertilizer producers Potash Corp of Saskatchewan
Inc and Agrium Inc said on Monday they agreed
to merge, sparking questions of whether the new company's
potential pricing power would attract tough regulatory scrutiny.
Dealmakers trying to push through aggressive mega-deals in
corporate America have had a tough year.
Antitrust authorities have challenged deals ranging from
oilfield services mergers to health insurance buyouts, while
other regulators have sought to crack down on deals that aid tax
avoidance or risk harming national security.
Wednesday's announced tie-up between Monsanto and Bayer, the
largest-ever all-cash acquisition, will inevitably face an
intense and lengthy regulatory process in the United States, the
European Union and elsewhere, regulatory experts said.
"This merger is not a slam dunk," said Diana Moss, president
of the American Antitrust Institute.
Hugh Grant, Monsanto's chief executive, told reporters on
Wednesday the companies will need to file in about 30
jurisdictions for the merger.
The value of the assets that Bayer is willing to divest is
to be revealed by next week, when details of the merger
agreement with Monsanto become public, according to sources
familiar with the deal.
Areas of potential overlap include some soybeans, canola and
Bayer's share of the U.S. cotton seed market sits at 38.5
percent, while Monsanto is at 31.2 percent, according to data
compiled by the Konkurrenz Group.
Monsanto and Bayer have had "initial contacts with
regulatory agencies describing what this combination would be
about," Bayer Chief Executive Officer Werner Baumann said on an
investor call on Wednesday, and "received encouraging feedback."
But U.S. antitrust enforcers will look at more than product
overlaps in assessing the proposed merger, said Moss.
"People don't get the enormous impact that these deals can
have on innovation markets. You need more innovators in there
battling it out so that you actually do produce new technology
for farmers," she said.
The deals would leave farmers facing a duopoly in seed
(Bayer/Monsanto and Dow) and two big firms in chemicals
(Syngenta and Bayer/Monsanto), she said.
In terms of the U.S. corn seeds and traits market, according
to Morgan Stanley Research, a merged Dow and DuPont would have
about a 41 percent market share, while a merged Monsanto-Bayer
would have about 36 percent share. In soybean seeds and traits,
the group estimated a merged Dow/DuPont would have about 38
percent. Monsanto-Bayer would have 28 percent.
One unknown factor that will influence these ag-related
deals is the U.S. political landscape after the November federal
Maurice Stucke, formerly in the Justice Department now with
the Konkurrenz Group, said it was highly unlikely that Obama
administration antitrust enforcers, who have knocked down a long
list of big mergers in concentrated industries this year, would
make the final decision in the Bayer-Monsanto deal.
"Merger reviews of this complexity would take six to nine
months," Stucke said. "This would be the first major test of the
(Additional reporting by Ludwig Burger in Frankfurt, Germany,
and Karl Plume in Chicago. Writing by P.J. Huffstutter in
Chicago; Editing by David Gregorio)