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gil.gullickson
Veteran Contributor

Mergers

All,

Any upsides/downsides from the flurry of mergers going on in the ag chem-seed industry the past few months? Of course, the latest one was last week's Bayer purchase of Monsanto.

Thanks,

Gil Gullickson

Crops Technology Editor

Successful Farming

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8 Replies
sw363535
Honored Advisor

Re: Mergers

Gil,

I just don't see much upside to any of it.  Historically it has meant less competition and choice.

And I want to think that leads to less innovation and development...

Monsanto is probably seeing some tough years ahead with its primary product (roundup) struggling to be effective or competitive in the marketplace.

I am afraid it may be telling us that any other trait technology is not working well enough to be profitable(well lets say profitable enough for monsanto), besides it's original barnburners in insect control... which have found solid competition.  And their genetic base is not that solid...

 

I hope it doesn't signal a future movement to kill the ethanol industry.  We live in foolish political times... on the one hand and possibly an attach on the way we trade commodities on the other hand.............. I guess better to say uncertain economic times in agriculture.

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gil.gullickson
Veteran Contributor

Re: Mergers

Thx. I picked this article up shortly after I made this post. Sounds like Monsanto was backed into a corner to where its stock would have been hammered had it not made the deal. I wonder, too, with the current price outlook if its traits biz wasn't looking very promising. 

 

I remember talking to an ag dean of a land-grant university a few years ago about ethanol's govt. support being on the chopping block in Congress-White House negotiations. I would probably get it wrong if I named the White House official he quoted as saving it, but it is unnerving to know the support/subsidy or whatever you call it was one heartbeat away from getting chopped.

 

 

http://www.stltoday.com/business/columns/david-nicklaus/monsanto-the-premium-ag-player-ends-up-being...

 

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sw363535
Honored Advisor

Re: Mergers

I suppose it can be viewed that way Gil, but I wonder when shareholders became day traders instead of owners.

If the shareholders of Monsanto were proud owners, how would they have viewed the speculative increase in value of stock caused by one offer......

Not sure i made my thought clear, but it seems to me that investors these days would sell their wives a week after the marriage if the price was right....

Whatever happened to "Thats a good company I would like to own" because I believe in what they do.

When did that become "lets make a fast buck", sell the "what's it's name" company.

 

And when did a company like Monsanto, who survived through the first depression suddenly throw it all away for a quick buck...

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sw363535
Honored Advisor

Re: Mergers

 

Gil I have another question....

 

In your prep for this subject, how do you think the US will be treated in this merger?

 

Monsanto has long been a predatary marketer,  by either crushing competition or pricing schemes (1.. Stating a reasonable price on the trait while sky rocketing the price of genetics.  2.. What the market will bear,,,, varying state by state, crop by crop 3.. Forced Bundling of products  4. Marketing same product in multiple disguises and false claims..etc)  Or legal threats.... Probably the worst marketing company I have ever seen. Breaking every rule in customer relations.

 

Will any of that improve with Bayer in control?  Will we still get the highest price for the same product compared to the rest of the world we compete with??

 

 

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Katzenjammer12
Senior Contributor

Re: Mergers

What price should a company charge other than what the market will bear?  Isn't that capitalism at it's finest?  Do you sell your corn for less than you can just because your brother-in-law cattle feeder is whining about the price of feed?

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gil.gullickson
Veteran Contributor

Re: Mergers

All,

 One thing I wonder about is in the EU, there is some labor representation involved in these things who may take a dimmer view of some negative aspects of mergers (i.e. layoffs). Then again, that doesn't affect farmers directly, but there could be some things that come up in this that might alter/slow the merger. 

 

Mergers don't always work as corporate chiefs plant--ABC and Disney in the 90s had some problems as did Time Warmer-AOL in the early 2000s.So as to if farmers benefit from improved research and technology? Maybe, maybe not.

 

 I do think one reason Monsanto moved as it did is it would have gotten pounded by stockholders if it had passed on Bayer's offer. That happened to Syngenta a year ago when it spurned an offer by Monsanto and shortly afterward, the ChemChina offer came up. 

 

I'd suspect if Bayer is buying Monsanto, ultimately, Monsanto will have to bend to what the Bayer folks in Germany say. But it will be a drawn-out process.

 

Gil 

 

 

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Katzenjammer12
Senior Contributor

Re: Mergers

When you get a European firm in the leadership position, you are going to get some interesting firewalls set up to prevent litigation.  Europeans are not interested in US still litigation so they may keep Monsanto separate enough that Bayer can't be drawn into the fray if someone gets taken to court.

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sw363535
Honored Advisor

Re: Mergers

I am not sure "what the market will bear" is an accurate description in this case.... or any case for that matter, where a near monopoly in competition exists....

In some cases there have been attempts through bundling and threatened litigation to force purchases and destroy competition....

Without competition, there is no "market" to bear anything....

 

I just have a fear that we may regret the day that our germ technology got passed into hands that may ruin it ..... or leave us in a place where nothing is tested or proven except after it is sold....

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