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)

Canadian Ideas:Trends in Agriculture

Corn production was overestimated,according to John Stephenson,senior vice-president and portfolio manager at First Asset Investment Management.Look for higher corn and soybean prices.Corn is moving higher in the second half of the year;the U.S. is responsible for 65% of the corn trade.
The U.S. situation is extremely good for fertilizer producers.Farmers are planting so late in flooded fields.They're gonna have to refertilize-especially in the fall.
Eventually,supply will meet demand,but China looks to be an importer this year.Farmers are rushing to plant corn.
There's a very strong market for potash and nitrogen-based fertilizers.Within South America,Monsanto is doing incredibly well with its seed.China is also adopting this seed.
What happened in America in terms of the predominance of large-scale farming is also gonna happen in China,Mr.Stephenson predicts.
First Asset Investment Management is a Canadian firm that offers Toronto Stock Exchange-listed investment funds,mutual funds,principal-protected notes and flow-through limited partnerships.It has around 2.5 billion dollars under management.
PowerShares DB Agriculture Fund(DBA),PowerShares DB Commodity Fund(DBC),Monsanto(MON),Potash Corporation of Saskatchewan(POT)

Advantage View:Investing In Inflationary Times

With the recent surge in commodity prices,investors may be wondering what their next move should be.In evaluating a company as a possible investment during such times,you must ask how much their input cost is as the cost of final goods;and whether they can pass this cost on or are vulnerable to rising commodity prices.
RiverFront Investment Group sees energy and mining companies as winners in inflationary scenarios.They also like Monsanto,since farmers will plant more crops during such times,and Monsanto produces the seed they need.McDonald's benefits because,with groceries more expensive,McDonald's is more competitive for your food dollars.Commodity firms such as Exxon Mobil would also do well.
Equities in general are an inflation hedge.For goods traded on the global marketplace,we do have inflation issues there,and that's where I would focus,says Doug Sandler,Chief Equity Strategist at RiverFront.
RiverFront Investment Group is an independent,SEC-registered investment advisor,providing asset management,investment advice and leading edge market insights.They are located in Richmond,Virginia.
Monsanto(MON),McDonald's(MCD),Exxon Mobil(XOM)