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Bayer, Monsanto merger creates behemoth

The Straits Times

FRANKFURT • German chemicals and pharmaceuticals giant Bayer sealed a US$63 billion (S$84 billion) merger with US-based Monsanto yesterday, creating an agrichemical behemoth with lofty ambitions to feed the world, but which was lambasted by environmentalists.

"Feeding a growing world population is a long-term trend, and we want to contribute to its solution," Bayer chief executive Werner Baumann told business newspaper Handelsblatt in an interview on Tuesday. Executives are betting big on projections that around 10 billion people will live on Earth by 2050, meaning more food must grow on the same amount of arable land.

They say that can best be achieved with technologies rejected by green organisations and politicians, including genetically modified seeds designed to resist strong pesticides.

Modified crops and digital tools to help farmers adapt to the weather and monitor the health of their fields could also help swell harvests threatened by climate change.

"We will help our customers to grow more with less," Mr Baumann said on Monday, while promising "we will apply the same rigour in achieving our sustainability targets as we do to our financial targets".

"The decisive question will be whether Bayer is strong enough to do the splits," Handelsblatt predicted. "On the one side is the business necessity to make as much money as possible with plant protection chemicals and seeds as investors demand. On the other, Bayer must earn trust among a public that's increasingly sceptical about industrial agriculture."

  • €45b

    Annual revenues expected to be generated by the Bayer-Monsanto marriage, which will create a global giant with 115,000 employees.]

Following Dow and DuPont's merger last year and ChemChina's acquisition of Swiss firm Syngenta, the Bayer-Monsanto tie-up is the latest in a string of mega-mergers in the chemical industry that have created mammoths in Europe, the US and Asia.

Launched in 2016, the Bayer-Monsanto marriage will create a global giant with 115,000 employees and annual revenues of €45 billion (S$71 billion). The competition authorities forced Bayer to sell chunks of its existing seeds and agrichemical business, with revenues of around €2.2 billion per year, to rival BASF before allowing the deal.

Even taking that into account, Bayer and Monsanto's agriculture arms boasted combined sales of €19.7 billion last year, far outstripping DowDuPont and ChemChina.

The combination completes the firm's transition from a chemicals and pharmaceuticals maker to what it calls a "life science" business. In its new form, Bayer will earn around half its revenue from prescription and over-the-counter medications and half from agriculture.

While it hailed a "sound strategic rationale" for the deal and "robust long-term fundamentals" in the agrichemical sector, ratings agency Moody's downgraded Bayer's debt earlier this week.

Bayer is as keen to ease pressure from environmentalists and politicians as it seeks to satisfy investors. A worldwide backlash against "industrial agriculture" and Monsanto in particular prompted executives to announce this week that the name would be abandoned.