Why Bayer is Acquiring Monsanto

German health care and chemicals titan Bayer AG,a prominent maker of aspirin,is offering 62 billion dollars for its American peer Monsanto,a seed and agricultural chemicals specialist,or 122.00 a share.It would be the biggest ever acquisition of a foreign company by a German firm.Monsanto rose 4.41% to 106.00 on the news.*
Bayer is afraid of being left out as the space is consolidating around it,said John Oxgaard,chemicals equity analyst at Sanford Bernstein.It's a good time to consolidate the industry.The big force is the end of the ag cycle.When farmers incomes are low,they just don't have the money for their inputs and will negotiate over costs.*
Bayer doesn't have the cash for Monsanto;they will have to issue equity.I am skeptical about the deal.Ultimately,I think there is a gap between what Bayer is willing to pay and Monsanto is willing to accept.*
Monsanto is one of the the most hated companies in the world,being responsible for the development and marketing of Genetically Modified Organisms.It is kind of surprising that a European company is making this bid.If they do succeed,I expect the Monsanto name will probably disappear rather quickly.Although Bayer had been in the GMO business itself before abandoning the effort in the face of withering criticism,it doesn't seem to have been tainted the way Monsanto was,Mr.Oxgaard noted.*
Agricultural chemicals would make up nearly half of Bayer's portfolio,if the deal goes through.*
Monsanto Inc (MON),Bayer AG (Madrid:BAY)