Monsanto Chief Executive Hugh Grant sees “minimal” antitrust issues with Bayer’s purchase of his company, but he insisted on a $2 billion insurance policy against those very issues.

The $2 billion is a breakup fee that Bayer must pay if regulators reject the $66 billion deal, and it was a priority for Monsanto during negotiations. Monsanto rejected Bayer’s first offer in May partly because it didn’t contain a breakup fee, and when Bayer later offered a $1 billion fee Monsanto said it was “insufficient to ensure deal certainty.”

By David Nicklaus St. Louis Post-Dispatch

Monsanto’s insistence on the breakup fee highlights the uncertain nature of antitrust enforcement around the world, especially in a politically sensitive sector such as agriculture. According to Thomson Reuters, regulators have blocked deals worth $682 billion this year, including large mergers in the health insurance, retail and oil field services industries.

For their part, Bayer executives express confidence that the deal will go through. Liam Condon, head of the crop science division, told investors Wednesday that Bayer was “encouraged by the feedback” from regulators. “I think there is a good sense of the strategic rationale behind the deal, and the fact that we are focusing on innovation and growth is highly appreciated,” he added.

“When you look at that from a regulatory point of view as we studied it, it is a very clean deal,” Grant said on the same conference call. “The overlaps are clear and obvious, and they are fairly minimal.”

One obvious overlap is cotton seed, where Monsanto and Bayer control nearly 70 percent of the market. Antitrust experts think regulators also will scrutinize vegetable seeds and the rivalry between Bayer’s Liberty Link corn, soybeans and canola and Monsanto’s Roundup Ready varieties.

If those truly are regulators’ only concerns, a handful of divestitures may be enough to get the deal approved. But the U.S. Justice Department — and similar agencies in the European Union and in important agricultural nations like Brazil and India — might also worry about the broader effects of consolidation among farm suppliers.


Dow Chemical and DuPont are combining their agriculture businesses in a deal that’s also awaiting approval. If that and the Bayer-Monsanto deal both go forward, four companies would sell more than 90 percent of the world’s seeds and crop chemicals.

Bayer alone would control more than a quarter of the seed market and nearly a quarter of crop-chemical sales.


Would such a concentrated market mean higher prices for farmers? Would it mean fewer potential buyers — and ultimately fewer investment dollars — for the dozens of venture-capital-funded startups pursuing agricultural research in places like St. Louis County’s Helix Center?

The big companies’ line is that mergers will make their own research more effective. By combining Monsanto’s genetics expertise with Bayer’s chemistry knowledge, they say they’ll increase farmers’ yields while saving them money.

Nicholas Kalaitzandonakes, professor of agribusiness strategy at the University of Missouri, believes those gains are real. “When you are looking at a slower-growing economy, those efficiencies are important,” he said.

Peter Carstensen, an emeritus law professor at the University of Wisconsin, says he’d like to see a rigorous review that goes beyond studying specific markets for corn, cotton or canola. He thinks a Clinton or Trump administration will want to tread carefully in considering its first big merger.

Grant may talk confidently about overcoming regulatory hurdles, but he has no idea what U.S. antitrust policy will look like next year. That political uncertainty is one of many reasons he’s glad to have a $2 billion insurance policy.

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