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Seeds of change

Global demand for food is rising fast and the agrifood industry is struggling to keep pace. Grant Murgatroyd learns how M&A and innovation are driving change in perhaps the oldest industry.

The seeds have been sown, but the crop has yet to be harvested. Earlier this year, rumours surfaced of a $62bn takeover of US agrichemicals giant Monsanto – best known for its genetically modified (GM) crop technology – by Bayer. The German drugs and chemicals group’s $122-a-share bid was rebuffed, though the two companies are a geographical and technological fit and are likely to continue their courtship.

Even if the parties consent, a deal is not certain. In 2007, US anti-trust officials blocked a $1.5bn takeover of cottonseed producer Delta & Pine Land Company by Monsanto, until that company sold off the Stoneville Pedigree Seeds Company (coincidentally to Bayer). The Department of Justice had ruled that the merger posed a “serious threat to competition”.

Bayer-Monsanto is the biggest of a bumper crop of deals. The value of M&A worldwide in the agricultural and chemicals sector has trebled from $48.7bn in 2009 to $147bn in 2015, according to data from Thomson Reuters (see graph below). The first six months of 2016 saw $142.6bn of deals announced already. At the same time, the number of deals has remained steady, with 1,200 recorded in 2009 and 1,489 in 2015. Big deals are driving activity.

In February, China National Chemical Corp offered more than $43bn in cash for Swiss pesticides maker Syngenta, trumping a rival offer from Monsanto. The companies are confident of completing the deal by the end of the year, though CLSA analyst Mark Connelly says it has only a 35% chance of success – with concerns about food security a possible spanner in the works.

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