Monsanto Takeover

Trump Could Be Bayer's Lucky Break

  • Why it matters

    Why it matters

    If Bayer and Monsanto merge, it would allow the resources for groundbreaking agricultural research – although many fear it will be at the risk of the environment and human health.

  • Facts

    Facts

    • Joshua Wright is seen as a candidate to head up corporate investigations at the Department of Justice under the Trump administration, and is known for respecting laissez-fair policy.
    • Legal experts expect to see an antitrust decision on Bayer-Monsanto in about six months.
    • In eight years of presidency, Mr. Obama‘s team only opposed 271 of 9,551 acquisitions or mergers – a rate of 2.8 percent.
  • Audio

    Audio

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Weather-Predicting Tech Behind the $62 Billion Monsanto Co. Bid
A farmer drives a digitally outfitted tractor. German chemical company Bayer AG cited the growth in such digitally assisted farming as a key reason for its $62 billion bid for Monsanto Co., which has become a leading provider of analytics used by growers. Source: Luke MacGregor / Bloomberg

He enjoys wear old-fashioned pinstriped suits and a big knot in his tie. Joshua Wright is only 39 years old, but he is as conservative as his clothing. As a Republican representative in the U.S. Federal Trade Commission in 2015, he voted for a merger of food giants Sysco and U.S. Foods. Then the Democrats made it impossible. But Mr. Wright might soon have the power to approve mergers in his own hands.

Mr. Wright is a cartel expert on President-elect Donald Trump’s transition team. The lawyer and economist, seen as a candidate to head up corporate investigations at the Department of Justice, has a typical Republican view of tie-ups. “The merging of competitors often does not lead to more concentrated market power,” he said. “It frequently benefits consumers by creating lower prices and higher quality.”

That should get the attention of executives at German pharmaceutical and chemicals company Bayer AG. A few days ago, the enterprise submitted its application for approval of its $66 billion takeover of Monsanto to U.S. authorities. Now the clock is ticking on the mega-merger in the agrochemicals sector. It’s expected to be an intense deliberation, as power in the industry has become so consolidated. The U.S. chemical concerns Dow Chemical and Dupont are merging. And Syngenta is being taken over by the Chinese state company Chemchina.

Investors are still skeptical about the Bayer-Monsanto deal being waved through by antitrust authorities. The stock price of the U.S. maker is currently $105 – still way below the agreed purchase price of $128. Bayer was unwilling to comment on whether they thought the election of Mr. Trump would increase their chances of pushing through the merger.

 

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Insiders expect a decision in six months, and an approval in the U.S. with few concessions. On one hand, they are confident in Bayer’s argument that the merger should bring plant and agricultural research to uncharted territory. Republicans are known for being economically laissez-faire.

And Mr. Trump? He promised to oppose established “power structures,” but hasn’t said much since being elected. During the campaign he was highly critical of Time Warner’s takeover by mobile communications company AT&T. But he may not keep his promise to kill the deal as president. The Financial Times reported this week that Mr. Trump’s transition team seemed more open-minded about the idea. It’s no wonder the stock price of Time Warner has soared by 10 percent since Mr. Trump’s election victory.

Another adviser in Mr. Trump’s transition team is David Higbee, who was responsible for examining mergers between 2001 and 2005 under President George Bush. “He has more confidence in companies and markets than he does in governments and authorities,” said Bruce McDonald from the law firm Jones Day.

America’s Federal Trade Commission and Department of Justice (DOJ) are responsible for cartel examinations. In the case of Bayer and Monsanto, it is the latter. Most of people working there will retain their jobs post-election. “Nothing much changes there,” said David Braun, who used to work at the DOJ and is now a partner of the Chicago law firm Quarles & Brady.

Hardly any country is less interventionist than America. Mr. Obama’s team did prevent two major takeovers, including AT&T’s attempt to buy Deutsche Telekom subsidiary T-Mobile US. However in eight years of presidency, Mr. Obama‘s team only opposed 271 of 9,551 acquisitions or mergers – a rate of 2.8 percent. Under Mr. Trump, the government could return to rates of 2 percent like under George W. Bush, or even Ronald Reagan, who only objected to 1 percent of all transactions.

Mr. Trump appears to be interested in anything which he believes can serves the country’s economy. Bayer is aware of this. It must be careful to position itself not as an intruder, but as a U.S. company which wants to develop the world’s biggest agricultural research center in the Midwest.

There is just one problem: China. Mr. Obama prevented the takeover of German technology company Aixtron by a Chinese investor.  Mr. Trump would probably have made a similar decision. “Takeovers in that area will be difficult,” said Martin Richenhagen, head of U.S. tractor manufacturers Agco.

 

 

Thomas Jahn is Handelsblatt’s New York bureau chief. Bert-Friedrich Fröndhoff leads a team of reporters which covers the chemicals, healthcare and services industries at Handelsblatt. To contact the authors: jahn@handelsblatt.com andfroendhoff@handelsblatt.com

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