Monsanto’s recent announcement that it was in talks to purchase the world’s largest pesticide producer Syngenta AG raised a series of concerns among U.S. farmers who fear that the deal would result in price hikes for crop chemicals and seeds.
Switzerland-based Syngenta AG is currently Monsanto’s top competitor in the pesticide business. So, a merger raised concerns about the impact on competition in various circles. Monsanto, which is the world’s largest seed producer, made an initial offer of $45 billion to Syngenta. The deal was disclosed in May.
Nevertheless, the St. Louis-based company’s relationship with U.S. farmers was a tight one long before the announcement. Farmers in the U.S. depend on the seed giant to buy genetically modified seeds that help them have larger crop yields that are resistant to most common weeds and pests.
Yet, farmers complained on various occasions that prices and strict rules of the company sometimes work against them. So, a series of lawsuits against Monsanto spurred and severely damaged its reputation.
Additionally, Syngenta isn’t pleased with the offer. The Swiss producer criticized Monsanto for launching a bid that highly undervalues its global business and breaks a series of European antitrust rules despite the U.S. company’s promise that it would sell to other firms Syngenta’s seed operations and the pesticides that both producers currently sell.
As a result, Monsanto beefed up its offer to $477.87 per share and a $2 billion breakup fee in case the deal wouldn’t stand due to regulatory hurdles. While Monsanto expressed its disappointment with the Swiss pesticide maker for failing to see the
”many benefits of this combination,” Syngenta couldn’t be reached for comment.
But farm groups are very concerned about a Monsanto-Syngenta merger. The American Farm Bureau Federation announced that it would keep an eye on the negotiations, while several farmers unions are debating concerns about the deal during their board meetings.
“When you have that much market power, there’s too much money to be made using your market power to push the company’s interests forward,”
John Hansen from the National Farmers Union noted.
Activist groups that are against genetically modified crops criticized the deal for the future harms to the environment synthetic fertilizers and pesticides may bring, while U.S. regulators expressed their concerns that Monsanto may shift its tax base to Switzerland like many tax-inversion deals did.
If the deal stands, Monsanto would hold more than 40 percent of the U.S. pesticide market, 28 percent in Brazil and 25 percent in the E.U. and Middle East. Combined the two companies currently commercialize 26 percent of the world’s crop chemicals.
Image Source: RT
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