Straight thinking about Bayer and Monsanto

That is my latest Bloomberg column, hardly anyone has a consistent and evidence-based view on this deal.  Here is one bit:

Critics who dislike Monsanto for its leading role in developing genetically modified organisms and agricultural chemicals shouldn’t also be citing monopoly concerns as a reason to oppose the merger — that combination of views doesn’t make sense. Let’s say for instance that the deal raised the price of GMOs due to monopoly power. Farmers would respond by using those seeds less, and presumably that should be welcome news to GMO opponents.

Yet on the other side:

What does Bayer hope to get for its $66 billion, $128-a-share offer? The company has argued that it will be able to eliminate some duplicated jobs and expenses, negotiate better deals with suppliers and invest more funds in research and development. Maybe, but the broader reality is less cheery. There is a well-known academic literature, dating to the early 1990s, showing that acquiring firms usually decline in value after tender offers, especially after the biggest deals. Mergers do not seem to make companies more valuable or efficient.

And this:

The whole Bayer-Monsanto case is a classic example of how a vociferous public debate can disguise or even reverse the true issues at stake. If Bayer fails to close the deal for Monsanto, Bayer shareholders may be the biggest winners. The biggest losers from a failed deal may be its opponents, who will spend the rest of their lives in a world where misguided judgments of corporate popularity have increasing sway over laws and regulations.

Do read the whole thing.

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