Farm Journal: Bayer/Monsanto Integration: Don’t Expect Big Changes, Yet
An article written by Sonja Begemann, Farm Journal’s Seeds and Crop Production Editor, and published on August 23, 2018.
After two long years of waiting, Bayer and Monsanto executives sit together at the table as one team. Until last week, the companies could not share business information as a condition of the Department of Justice requirements for the acquisition.
The $66 billion acquisition joins together two powerhouses: Bayer’s chemical portfolio and Monsanto’s seed and trait engine. The company divested more than $7 billion in assets, including the Bayer row crop and vegetable seeds business, glufosinate business, certain glyphosate businesses and several other assets to gain access to Monsanto.
“It’s been a long time coming [the full integration] but one advantage [is] we’re extremely well-prepared,” says Liam Condon, Bayer president of the Crop Sciences Division. “At the end of the day what we want to do is bring what we think is the most advanced technology platform together.”
Since the two companies first struck a deal, Bayer promised that the St. Louis-based Monsanto locations would stay intact—a promise Condon reiterated. In fact, the space is needed because Bayer’s new North American headquarters will be located there. It recently expanded capacity in St. Louis greenhouses by $400 million and will continue to expand to house scientists moving from Research Triangle Park, N.C. (Bayer’s former North American headquarters).
Bayer has claimed since the start of the acquisition it would improve crop technology innovation for farmers. The company invests about 10% of its sales to research and development.
“Proforma [last year] that would be about $2.8 billion for the combined company—far and away the biggest spend in the industry,” Condon says. “That’s why we’re so confident we can generate innovation faster.”
Combining seed and trait development with chemical discovery could lead to a more seamless, faster introduction of new technologies, says Brett Begemann, COO (Disclosure: the author and this source are cousins). He says there will also be immediate, short-term benefits, too.
“[For example] fungicides behave differently on different genetics, which was hard to look at before because we didn’t have fungicides. We can look at that now,” Begemann says. “We can leverage that data and information to recommend what fungicide to use on what hybrid. It’ll improve the efficacy of products farmers have in their fields today.”
He says in five years farmers won’t be talking about how Bayer and Monsanto combined, but instead about how data changed the way they farm. Still, farmers have expressed anxiety about the acquisition and recent wave of consolidation because of its potential impact on input prices and competition in the short- and long-term.
However, Dean Cavey, a partner at Verdant Partners, who is an outsider to the deal, doesn’t believe these fears will materialize.
“An expanding world population combined with declining arable land means that yields and productivity must improve. That must come through innovation, and that is costly. The combination of Bayer and Monsanto will allow more resources to be dedicated toward new innovative technologies and products. Second, we do not have significantly less participants in the space now, we have just moved around some of the assets. Just a couple of years ago the ‘Big 5’ consisted of Monsanto, Dow AgroSciences, DuPont, Syngenta and Bayer. Now we have Bayer, Corteva, Syngenta and BASF.”
“Every choice that a farmer had yesterday, they’ll have tomorrow,” Begemann says. “In some cases the choice from Bayer may now come from BASF. I think that anxiety that is there [won’t] be there in three years.”
Another question weighing heavily on some minds in farm country is what this means for jobs. Because the transition to one company is so early in the process, some members of the industry are taking a wait-and-see approach to what actually happens when it comes to potential job cuts.
“We may start seeing some tangible changes resulting from Bayer’s acquisition of Monsanto,” Cavey says. “These changes have not been disclosed by the parties but are likely to include personnel changes and a likely change in name and branding in favor of Bayer.”
The signs are there—literally. The St. Louis location is now adorned with Bayer signs. As far as staffing changes go, executives say there might be some, but for now farmers can expect status quo in the field.
“We’re about to go into the [harvest] season, they’re [farmers] thinking about seed decisions for next year—we’re not going to change. We’ll be gradual in those steps,” Begemann says. “I do believe ag is going to change dramatically [and] I think data and data analytics will change ag more than biotech changed ag.”