The significance a merger, no matter the industry in which it occurs, and the ability for investors to directly invest in the new combined effort within the given space allows market participants to grow in tandem with the newly merged entity. Several months ago, in May, the Department of Justice approved a multi-billion dollar merger deal between Bayer (BAYRY), the pharmaceutical conglomerate responsible for overseeing brands such as Aleve, Alka Seltzer, Claritin, Coppertone, and countless others, and Monsanto (MON), an agricultural/biotechnology company famously known for their GMO seed production for farmers around the world.
As part of the deal between the two companies, the DOJ demanded that Bayer (BAYRY) divest its entire seed business, including cotton, canola, soybean and vegetable seeds at the risk of the merger creating a force no other company in the space could compete with. Makan Delrahim, Antitrust Division Chief, called the deal the “largest divestiture ever required by the United States in a meager enforcement proceeding,” given that the Bayer’s (BAYRY) divestments, once followed through with, will amount in roughly $9 billion in businesses and assets, according to CNN.
Regardless of the necessary, albeit arguably painful, divestitures, Bayer (BAYRY) and Monsanto (MON) now represent the world’s largest agrochemical and seed-manufacturing company, and, in entering this conjoined territory, the newly merged company is under mounting pressure to prove to investors that this union is worth investing in.
Following the news of the merger, shares of Bayer (BAYRY) stock dropped, and the company has been in a major slump since August, when a California jury found that the Monsanto’s (MON) weedkiller brand Roundup, may have given a school janitor cancer, resulting in the company’s market value tanking $34 billion following the court’s ruling. According to a Time Magazine article, Dewayne Anthony Lee Johnson was diagnosed with terminal cancer back in 2014, and later discovered that he had developed non-Hodgkin lymphoma after years of regular exposure to the Roundup herbicide while on the job as a school groundskeeper. Time reported that in Aug, a San Francisco jury unanimously agreed that Monsanto (MON) “had failed to warn of the carcinogenic dangers of its popular Roundup herbicide,” and in light of this news, thousands of other cancer victims have come forward with claims against Monsanto (MON) and their products.
“On a typical day, I would fill up my little container with raw pesticide liquid and then put that in the back of my truck and..mix it all in a tank…then I would head out and start spraying it.”
-Dewayne Anthony Lee Johnson
In recent news, perhaps as a means to balance the sheets a bit, Bayer (BAYRY)announced plans to layoff 12,000 if its employees worldwide, as well as exit any ventures relating to the field of veterinary medicines, according to Bloomberg.
Bayer (BAYRY) explained their actions in a press release released on Thursday:
“…The company will seek to achieve greater efficiency across its supporting functions and services…These measures will include a reduction of around 12,000 of 118,200 jobs worldwide, a significant number of them in Germany…A portion of the freed-up funds is set to be used to strengthen innovation and competitiveness at the divisions…”
–Bayer AG Press Release
Removing the niceties and prose from the above press release, Bayer (BAYRY) is doing everything in their power to convince investors that the Monsanto (MON) deal, while costly, will allow the company to innovate and remain competitive in all divisions it participates in. Chief Executive Officer Werner Baumann assured reporters on Thursday that the decision to cut the 12,000 jobs had nothing to do with the Monsanto (MON) deal or their current legal situation regarding the Roundup case. Baumann explained that “a leaner organization” will help the company “become more responsive to changing markets and increase our agility.”
That’s incredible, firing thousands of people will lead to improved physical capabilities? Why I’ve never heard of that! Simply astounding!
