May 19, 2020

What does Bayer's Monsato takeover mean for the agricultural sector?

genetically modified food
agriculture
Bayer
Monsato
Sumit Modi
3 min
What does Bayer's Monsato takeover mean for the agricultural sector?

Bayer, the German chemicals giant, has confirmed it will take over American GM seeds business Monsato for a whopping $66 billion, creating the world’s largest ever seeds and pesticides company.

 

The deal has caused huge controversy. While genetically modified crops are commonplace in the US, they are not in Europe, and environmental activists worldwide have protested fiercely. Bayer claims that feeding the ever-increasing population will be a massive challenge if GM crops are not embraced.

John Colley of Warwick Business School is a Professor of Practice in the Strategy & International Business Group who researches long takeovers, and was also a former MD of a FTSE 100 company which was involved in a hostile takeover.

He said of the Bayer takeover:

"Bayer's acquisition of 'Frankenstein' crop producer Monsanto could be a horror story for both Bayer and its customers: the farmers. 

"Apart from Monsanto's shareholders, who have hit the jackpot, this looks like a lose-lose bid. Bayer have been forced into paying too much and face major integration and competition authority risks. 

"By the time the competition authorities have finished with their demands Bayer may regret setting a German record. The farmers will lose out as product ranges are rationalised and attempts are made to increase prices. Bayer may have won the bid now, but could regret the move at their leisure. Bayer CEO Werner Baumann may be cursing his luck. Bayer's shareholders may be cursing him. 

"Bayer's hand was to some extent forced by recently agreed deals of ChemChina buying Swiss-based agrobusiness Syngenta for $44 billion cash rapidly followed by the all paper $130 billion merger of Dow Chemicals with Du Pont. Falling crop prices meant that demand and prices were declining for seeds and agricultural chemicals such as herbicides and pesticides. The industry is responding to adversity with a series of mergers which are expected to have three main benefits: cost reduction, less competition, and growth. 

"Bayer was clearly concerned at being left behind and was running out of options for merger targets precipitating the move for Monsanto. 

"German businesses are wary of major takeovers as research tells us that only around a quarter are successful, the vast bulk destroy value and around half are sold off again within 5 years.

"Clearly Bayer will realise cost savings from the acquisition, but they have had to pay an enormous price for Monsanto at a 45 percent premium to the previously undisturbed share price. In effect the bid premium is likely to represent rather more than any benefits extracted from the combination.

"On top of that integration will not be easy. In addition to the major culture clash between very different approaches to business, Monsanto is large and complex, which is a known contributory factor to a likely poor outcome.

"Reputational concerns also become an issue for Bayer with the GM foods campaign. EU and US competition authorities will make significant demands in terms of requiring disposals and imposing trade restrictions."

 

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Jun 10, 2021

G7 Summit guide: What it is and what leaders hope to achieve

G7
G7Summit
Sustainability
EU
3 min
Business Chief delves into what the G7 is and represents and what its 2021 summit hopes to achieve

Unless you’ve had your head buried in the sand, you’ll have seen the term ‘G7’ plastered all over the Internet this week. We’re going to give you the skinny on exactly what the G7 is and what its purpose on this planet is ─ and whether it’s a good or a bad collaboration. 

 

Who are the G7?

The Group of Seven, or ‘G7’, may sound like a collective of pirate lords from a certain Disney smash-hit, but in reality, it’s a group of the world’s seven largest “advanced” economies ─ the powerhouses of the world, if you like. 

The merry band comprises:

  • Canada
  • France
  • Germany
  • Italy
  • Japan
  • The United Kingdom
  • The United States

Historically, Russia was a member of the then-called ‘G8’ but found itself excluded after their ever-so-slightly illegal takeover of Crimea back in 2014.

 

Since 1977, the European Union has also been involved in some capacity with the G7 Summit. The Union is not recognised as an official member, but gradually, as with all Europe-linked affairs, the Union has integrated itself into the conversation and is now included in all political discussions on the annual summit agenda. 

 

When was the ‘G’ formed?

Back in 1975, when the world was reeling from its very first oil shock and the subsequent financial fallout that came with it, the heads of state and government from six of the leading industrial countries had a face-to-face meeting at the Chateau de Rambouillet to discuss the global economy, its trajectory, and what they could do to address the economic turmoil that reared its ugly head throughout the 70s. 

 

Why does the G7 exist?

At this very first summit ─ the ‘G6’ summit ─, the leaders adopted a 15-point communiqué, the Declaration of Rambouillet, and agreed to continuously meet once a year moving forward to address the problems of the day, with a rotating Presidency. One year later, Canada was welcomed into the fold, and the ‘G6’ became seven and has remained so ever since ─ Russia’s inclusion and exclusion not counted. 

 

The group, as previously mentioned, was born in the looming shadow of a financial crisis, but its purpose is more significant than just economics. When leaders from the group meet, they discuss and exchange ideas on a broad range of issues, including injustice around the world, geopolitical matters, security, and sustainability. 

 

It’s worth noting that, while the G7 may be made up of mighty nations, the bloc is an informal one. So, although it is considered an important annual event, declarations made during the summit are not legally binding. That said, they are still very influential and worth taking note of because it indicates the ambitions and outlines the initiatives of these particularly prominent leading nations. 

 

Where is the 2021 G7 summit?

This year, the summit will be held in the United Kingdom deep in the southwest of England, with Prime Minister Boris Johnson hosting his contemporaries in the quaint Cornish resort of Carbis Bay near St Ives in Cornwall. 
 

What will be discussed this year? 

After almost two years of remote communication, this will be the first in-person G7 summit since the novel Coronavirus first took hold of the globe, and Britain wants “leaders to seize the opportunity to build back better from coronavirus, uniting to make the future fairer, greener, and more prosperous.”

 

The three-day summit, running from Friday to Sunday, will see the seven leaders discussing a whole host of shared challenges, ranging from the pandemic and vaccine development and distribution to the ongoing global fight against climate change through the implementation of sustainable norms and values. 

 

According to the UK government, the attendees will also be taking a look at “ensuring that people everywhere can benefit from open trade, technological change, and scientific discovery.” 

 

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