By: Soo Rin Kim
If you shuddered at the possibility of St. Louis-based crop titan Monsanto Co. taking over Swiss pesticides giant Syngenta AG last summer, you're probably having a bad week: Monsanto has agreed to be acquired by German chemical conglomerate Bayer AG for $56.5 billion.
Monsanto and Bayer are already two of the biggest agrichemical corporations in the world, with the crop firm accounting for 26 percent of the global seeds market and the German firm providing roughly 17 percent of the world's pesticides. Together, Bayer and Monsanto are expected to control 29 percent and 24 percent of of seeds and pesticides, respectively.
Should the deal be approved by regulators, it would be the largest merger of the year. And for that reason, it's certain to receive intense scrutiny by domestic and international regulators.
Fittingly for one of the biggest seed makers in the world, Monsanto has not once missed its place as the single biggest lobbying client in the U.S. agricultural service and product industry while spending $60 million over the past nine years.
When Monsanto's lobbying peaked in 2008, its near $9 million spending was more than three times the amount the American Farm Bureau spent that year.
Bayer has kept its place as one of the top players in the highly competitive pharmaceutical industry in the last decade. In fact, the German company has outspent Monsanto in the last couple of years. In 2015, Bayer spent $7.7 million on lobbying, while Monsanto stopped at a little over $4 million.
A big issue for both companies has been labeling of genetically modified foods, which both companies oppose. That put them in support of the Safe and Accurate Food Labeling Act (H.R. 1599), which was signed into law this summer. The law permits corporations to identify products made with genetically modified organisms in ways that critics argue will be hard for consumers to interpret, while superseding state laws that are sometimes tougher, like the one in Vermont.
The two companies' PACs have also been active in the congressional campaign level, with the majority of both Monsanto and Bayer contributions spent on Republican candidates. In this election cycle, the two PACs have spent over $1.2 million together so far. Monsanto and Bayer employees had kicked in another $115,000 in contributions to candidates by the middle of 2016.
At the Justice Department, where the antitrust review will take place, it's the companies' lawyers who will be interacting with the feds. So how will the firms' investments in politics help them out?
Wiley Rein LLP partner Caleb Burns noted that publicly controversial transactions often go through congressional hearings or investigations; lobbyists can play a key role in the process. In addition, mergers like this are extremely complicated, as are the antitrust rules, and Burns said he'd expect Bayer and Monsanto to jump into the process to explain the nuances and details to lawmakers and their staffs.
The merger falls in line with a consolidation trend in the crop and pesticides industry in the last few months, spurred by depressed crop prices and concomitant sluggishness in sales of the products made by these already huge companies. Dow Chemical and DuPont's agreement to combine in December is currently under the Justice Department's review, and China National Chemical Corporation sealed its $43 billion acquisition of Syngenta just last month.
If all three major match-ups are okayed by regulators, Mother Jones reports, the three conglomerates (Bayer-Monsanto, ChemChina-Syngenta and Dow-DuPont) will control 59 percent of the world's patented seeds and 64 percent of all pesticides.
Bayer CEO Werner Baumann told USA Today that the deal reflects "a powerful response to the enormous challenges facing farmers and the ag industry overall."
The union with Bayer, Monsanto claims, will allow the new company to cut costs and efficiently fuse pesticides and fertilizer product development with seed genetics biotechnology. It might also allow the name Monsanto -- synonymous with evil for some in the environmental community -- to be relegated to the history books; the shedding of the name appears to be under consideration.
Bayer has a powerful incentive to lobby especially hard for the merger's approval: If it doesn't clear antitrust hurdles and falls apart, the company has agreed to pay a $2 million breakup free to Monsanto.