Why a merger?
If Monsanto (MON) and Bayer merge, they’ll become the largest global pesticide and seed company. Monsanto’s business is the best fit for Bayer’s Crop Science segment, which contributes ~22% to Bayer’s total revenue. The segment is similar to Monsanto’s business, which deals with crop seeds and crop protection products such as insecticides and herbicides.
With Monsanto on its side, Bayer would expand its coverage significantly in North America (MOO) as well as in other markets where Monsanto is present. Monsanto earned ~65% of its revenue—or ~$9.7 billion—in North America in 2015. Of this 57%, $8.6 billion came from the United States alone.
Monsanto’s Seeds & Traits, Herbicides, and SeedGrowth businesses would add ~12.7 billion euros to Bayer’s total sales, leading Crop Science to account for 39% of Bayer’s revenue.
According to Bayer, “The combined business would benefit from a combined R&D pipeline that would deliver valuable and innovative solutions for farmers, with a focus on long-term investments to help advance the next generation of farming.”
With the industry consolidating—with mergers including Dow Chemical (DOW) and DuPont (DD) along with Syngenta (SYT) and ChemChina—investors hope that the resulting synergies will reduce costs and improve margins amid falling prices.