Bayer takes over Monsanto: What are the implications?
Monsanto, the American agribusiness company, is best known for its business in genetically modified organisms (GMOs) used in seeds for crops, together with the Roundup products. Both have been controversial from the environmental perspective. Roundup glyphosate herbicide is gradually being banned in the EU. GMOs and Roundup products are widely used in the US and many areas of the world, but highly restricted in Europe, where they are associated with ‘Frankenstein’ crops. Apparently undeterred, the German chemical and pharmaceutical giant, Bayer, launched a takeover bid for Monsanto in 2016, worth $66 billion. The price was considered high, indicating that Bayer was prepared to pay more than the company’s market value. Bayer already makes products for farms, so there was an element of horizontal integration in the deal. But Bayer is also an important company in healthcare products. Its most famous product is Bayer aspirin, which dates back to 1898. The purchase of Monsanto would make Bayer one of the world’s largest seeds and pesticides companies. There has been considerable consolidation in the agribusiness sector, and a number of mergers have taken place, as companies have sought to cut costs and gain efficiencies.
The takeover raised competition issues and needed to be cleared by competition authorities in up to 30 jurisdictions. It was cleared in Brazil, and, after two years of consideration in the US, the Justice Department cleared the deal in 2018, but only after Bayer agreed to sell off much of its US business in vegetable seeds and herbicides to the chemical company, BASF.
The takeover contributes to the concentration of global agribusiness, and boosts the agricultural business of Bayer, but the Monsanto purchase is controversial. Farmers and environ-mentalists have long highlighted the detriment to biodiversity caused by GMOs. Farmers who use GMO seeds are locked into a technological pathway dependent on the range of Monsanto products, including pesticides and herbicides. For them, the choice of products is likely to be reduced and the range will be streamlined. Moreover, prices are likely to rise. Monsanto faces ongoing class-action lawsuits from farmers in the US over damage caused by the company’s products. There are also US lawsuits brought on behalf of farm laborers for human rights abuse. The payment of any damages under these lawsuits would fall on Bayer. More-over, such cases can take many years proceeding through the legal system. In a landmark case decided in California, Monsanto was held liable to pay damages to a farmer suffering from cancer (Levin, 2019). Another financial concern is the huge debt that Bayer has incurred in the acquisition of Monsanto.
The name Monsanto will disappear, and Bayer will hope that the notoriety it has evoked will fade away. However, hostility to the type of agrochemical business it represents continues to raise ethical issues. The EU has had in place policies that promote sustainability in farming. Bayer’s acquisition of Monsanto could come back to haunt it
Questions?
• Why has Bayer acquired Monsanto?
• Who benefits from the acquisition of Monsanto?
