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Bayer-Monsanto Deal: What Does It Mean for Sustainable Agriculture?

cornBayer will buy Monsanto for a record $66 billion, the companies said yesterday, in a deal that will create the largest seed and pesticide company in the world. The companies’ combined agriculture revenue totaled $26 billion last year.

The all-cash deal — the largest on record — will see the German drug and chemical maker acquire the US agribusiness giant for $128 per share. This is Bayer’s fourth offer to purchase Monsanto.

Bayer also agreed to pay a $2 billion break-up fee if it doesn’t obtain the necessary regulatory approvals and the deal falls through because of antitrust laws. The companies expect the transaction to close by the end of 2017.

The deal illustrates the consolidation of the crop and seed industry. A year ago at least half a dozen global firms dominated the market, Industry Week reports. After the Bayer-Monsanto transaction closes, the number will shrink to four, including the new Dupont-Dow crop science business announced when the two chemical giants merged last December.

The Bayer-Monsanto deal could also have major implications for sustainable agriculture.

In a statement announcing the purchase, the companies touted their digital farming applications, which they say will help farmers improve their sourcing and yields, and lead to better environmental protection and sustainability.

“We are entering a new era in agriculture — one with significant challenges that demand new, sustainable solutions and technologies to enable growers to produce more with less,” Monsanto CEO Hugh Grant said. “This combination with Bayer will deliver just that.”

Liam Condon, head of Bayer’s Crop Science Division, added: “The agriculture industry is at the heart of one of the greatest challenges of our time: how to feed an additional 3 billion people in the world by 2050 in an environmentally sustainable way.”

Earlier this summer Bayer partnered with DuPont to launch a $15 million ag-tech accelerator fund that the companies say will make agriculture more productive and sustainable my advancing new technologies that can solve global farming problems. These include technology fields like genomics and plant sciences, seed tech, biologicals for crop protection and regulation, digital ag (application of data and predictive analytics to precision ag), and disruptive or novel farm systems.

Monsanto is also part of a newly formed partnership that aims to help farmers improve their bottom line while conserving natural resources through sustainable agriculture practices. Other founding members include major food and agriculture companies such as Cargill, General Mills, Kellogg, PepsiCo and Walmart.

Indeed, Monsanto has made several very public pledges and partnerships confirming its commitment to sustainable agriculture. In 2013 the agribusiness company partnered with biochemical firm Novozymes to launch the BioAg Alliance, which aims to improve crop harvests through naturally occurring microbes such as bacteria and fungi. And late last year Monsanto said it will make its operations carbon neutral by 2021 by working with farmers to cut emissions and a program targeted across its seed and crop protection operations.

Still, Monsanto hasn’t been able to make its sustainability-cred stick. The California EPA says the main ingredient in Monsanto’s chemical pesticide brand Roundup causes cancer and France and other European countries have banned the sale of Roundup, citing human health and environmental concerns. And while the jury is still out as to whether genetically modified crops will save — or destroy — sustainable agriculture, many environmentalists don’t like GMOs and they really don’t like the fact that they make up a big part of Monsanto’s business.

This merger could help change Monsanto’s image, says Lux Research analyst Laura Lee.

“This might be a chance for Monsanto to rebrand itself,” she said in an interview. “Monsanto has made several attempts to promote sustainable agriculture and they are public about their pledge to make their operations carbon neutral by 2021. But many of these pledges about sustainable farming fall on deaf ears. Monsanto has been the company that gets the negative target on their back.”

Lee says Bayer’s pharmaceutical background — and it being a trusted household brand — may rub off on Monsanto.

“If this acquisition goes through, it may be a chance for Monsanto to become a more trusted company to its pledges like conservation ag and carbon neutrality may have more gusto,” she said.

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