ET Intelligence Group: Bayer AG’s acquisition of MonsantoBSE -1.11 % is a positive for their Indian-listed subsidiaries – Bayer CropscienceBSE 0.76 % and Monsanto IndiaBSE -1.11 %. The reason behind Bayer’s acquisition is to widen its portfolio from agrochemical products to seeds, and the same will hold true for their Indian subsidiaries as well.
In India, as well as globally, seeds is a faster-growing industry than crop chemicals. In India, the seeds industry is growing at 15% and agrochemicals in single-digits. The Indian agrochemical industry is $2.5 billion and seeds are $2 billion. So the acquisition is a positive for Bayer’s shareholders.
Bayer CropScience, the India-listed subsidiary of Bayer AG, too has seeds business, though it is just around 12-15% of its total revenue. In the case of Monsanto, all the different seeds are in the portfolio of the listed company except cotton seeds which are with unlisted Monsanto subsidiary in a JV with Maharashtra Hybrid Company.
Despite high growth in the seeds industry, Monsanto has not been able to grow over the last few years in India due to lack of a strong distribution network and intense competition according to industry trackers. It also faces allegations against the seed technology . Bayer, on the other hand, has a good hold on distribution by creating a database of farmers in each district which can be used to plan and sell Monsanto’s products.
The deal may trigger an open offer in Monsanto India, but the offer price could be below the current market price. In the past, such global deals have triggered open offers in Indian subsidiaries but that has only remained a formality due to Sebi guidelines and the companies still continue to trade on Indian stock exchanges.
According to Sebi guidelines, the lowest open offer price has to be an average of weekly high and low of the closing prices of shares during 26 weeks or average of the daily high and low prices of shares during the two weeks prior to the date of the public announcement.
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Source: Economic Times