Monsanto acquisition by Bayer will be limited in Mexico

The German multinational company will be subject to certain restrictions in Mexico, due to the size of their operation in the agricultural market
Monsanto acquisition by Bayer will be limited in Mexico
Werner Baumann stated that the Monsanto acquisition is a strategic passing point in the growth of their company portfolio - Photo: Benoit Tessier/REUTERS
05/06/2018
16:23
Miguel Pallares
Mexico City
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The German multinational company Bayer, creator of the aspirin, recently announced the close of their major acquisition of the North-American company Monsanto on June 7, through a 63,000 million dollar transaction which will be limited in Mexico, due to the size and market share of the new corporate giant.

In Mexico, Bayer has over 3,000 employees, and their annual sales are above MXN$20,000 million. The company has two production plants in the State of Mexico, one in Tlaxcala, and another in Orizaba, which produce over-the-counter drugs such as Alka-Seltzer, as well as chemical products for crop protection and animal health.

Monsanto has a turnover of almost MXN$10,000 million a year in Mexico (around 500 million dollars) and a workforce of 750 employees. In the Mexican market, the multinational company owns brands such as Asgrow and Dekalb, it has four production plants and seven research centers.

“The Monsanto acquisition is a strategic passing point in the growth of our health and nutrition company portfolio. We will double the size of our agricultural business and create a powerful engine for innovation in agriculture,” said Werner Baumann, board chairman of Bayer AG.

Within the Mexican market, Bayer and Monsanto offer farmers a wide range of seeds and products for crop protection, such as herbicides.

“In Mexico, almost 100% of cotton plantations use transgenic seeds. On the other hand, soy is only cultivated in certain parts of the country, while the growth of genetically modified corn has been prohibited, although this product is imported from other countries such as the United States, where this type of seed is used,” he claimed.

After the acquisition, Bayer will become the sole supplier of genetically modified (transgenic) cotton seeds in Mexico and will obtain a broad participation in the seed market for onion, cucumber, tomato, watermelon, melon, and lettuce crops, among others, as well as non-selective herbicides.

Facing the potential magnitude of the company in Mexico, the national anti-trust organism determined that the acquisition was to be conditioned to the sale or disinvestment of transgenic cotton seeds, the total sale of vegetable seeds and certain non-selective herbicides of Bayer.

The Federal Economic Competition Commission (COFECE), lead by Alejandra Palacios, pointed out that the markets to be conditioned “present high entry barriers, mainly related to the difficulty required for the research and development of new products, regulatory restrictions, and heavy investments.

The COFECE has indicated that, should there not be any conditions for the operation “it would significantly reduce alternatives for Mexican farmers regarding a wide range of seeds and non-selective herbicides, which could ultimately cause a price increase and a decrease in competitiveness and innovation.”

During their announcement to the investors, Bayer informed that their company name will be kept, while the Monsanto name will disappear.

The names of the Monsanto products will remain unchanged and become part of the German multinational company’s portfolio.

On a global scale, Bayer will have to disinvest in businesses which currently generate an income of over USD$2,000 million per year while in Mexico, the company will have to make more adjustments to complete their operation.

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