SOURCE: Lux Research

Lux Research

January 10, 2017 07:30 ET

Partnerships and IP Show Why Bayer-Monsanto Merger Will Be a Winner

The $66 billion acquisition will create the only player with dominant positions in both agrichemicals and seeds, but the combined entity will be weak in digital agriculture, says Lux Research

BOSTON, MA--(Marketwired - January 10, 2017) - German giant Bayer's $66 billion acquisition of Monsanto is a winning deal that will create a global player with strong positions in key areas of agriculture innovation, including crop and seed traits, synthetic agrochemicals, and biologicals, according to Lux Research. However, the combined entity will be weak in Digital Ag, or precision agriculture.

Of the recent spate of megamergers in agriculture, the Bayer-Monsanto deal stands out not only because it is the largest, but also because it will create a company with significant market shares in both agrichemicals and seeds. The new agriculture landscape will be even more consolidated as the traditional "Big Six" become the "Behemoth Four" -- Bayer-Monsanto, Dow-DuPont, Syngenta-ChemChina, and BASF.

"Bayer wins by acquiring Monsanto's diversified capabilities in crop and seed traits, while the U.S. company gains Bayer's robust IP portfolio in synthetic agrochemicals," said Laura Lee, Lux Research Associate and lead author of the report titled, "Does Bayer's Acquisition of Monsanto Make Sense?"

"Together, the combined entity will be much stronger than other entities in the Behemoth Four but will be lackluster in their Digital Ag portfolio," she added.

Lux Research analysts studied the Bayer-Monsanto merger from two perspectives -- internal and external innovation. Among their findings:

  • Digital Ag is an obvious weakness. While Monsanto has built many Digital Ag partnerships, its approach is nonsensical. It has collaborated with many developers of unproven technologies but neglected well-validated ones -- a backwards approach.

  • Dominance in agrochemicals and seeds. Having both Monsanto's Roundup and Bayer's Liberty brands under the same roof will give the combined entity a huge competitive advantage in agrochemicals and seeds. Monsanto's diversified relationships across multiple genome editing technologies will give the duo an advantage in this space.

  • Bayer is surprisingly strong in biologicals. Monsanto is an acknowledged innovator in biologicals through its partnership with Novozymes called the BioAg alliance. But Bayer brings its own surprisingly strong biologicals portfolio, assembled through four key acquisitions -- Athenix, Prophyta, AgraQuest, and Laboratorios Biagro. The above figure details the breadth of external relationships that Monsanto and Bayer have each developed in the biologicals space.

The report, titled "Does Bayer's Acquisition of Monsanto Make Sense?," is part of the Lux Research Agro Innovation Intelligence and the Corporate Strategic Intelligence: Chemicals and Materials services.

About Lux Research

Lux Research provides strategic advice and ongoing intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.

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