Senior executives with Bayer and Monsanto are defending the German company’s proposed $66 billion acquisition of the St. Louis agricultural giant. They were among the industry leaders who testified Tuesday at a Senate Judiciary Committee hearing on agricultural consolidation.
The Bayer-Monsanto deal comes as other acquisitions in the agricultural sector are pending. Dow Chemical and DuPont are midway through the regulatory process, while ChemChina and Switzerland-based Syngenta also have a proposed deal.
ChemChina is operated by the Chinese government and was the only company that did not send a representative to the hearing on Capitol Hill.
Monsanto and Bayer representatives point to the rising cost of doing business as a key reason for the wave of consolidations. Part of that is the increasing amount of money that needs to be pumped into innovation. Monsanto says it's annual research and development costs have soared over the past 15 years from roughly $300 million to $1.5 billion.
"Now I know that sounds like a big number," Robb Fraley, Monsanto's chief technology officer told the committee.
"But compare that against the data and life science leaders -- like a Microsoft, or an Apple, or a Pfizer, or a Merck -- who each invest over $10 billion a year in R&D."
A bigger company means a larger pot for research and development investment. It's an argument the companies likely hope will ease the concerns of farmers who contend the larger business would slow down the pace of innovation, possibly to protect existing profitable technologies.
Bayer CropScience North America's president insists there will be a huge focus on innovation, if regulators approve the acquisition of Monsanto. Jim Blome points to estimates suggesting the global population will increase by three-billion by mid-century and farmers will need to meet those food demands.
"They know crop yields must increase by 60 percent," Blome told committee members. "This will not happen without continued investment in new technologies."
That's also an important point for the National Corn Growers Association, which is based in Chesterfield.
"In an era of declining federal and state agricultural research funding, these agribusiness research investments are vital to the future of food production," Chris Novak, the association's chief executive officer said.
"Consolidation can provide farmers better access to technology through expanded research platforms," although Novak said the organization is concerned about consolidation being compounded by domestic and international regulatory hurdles.
Jobs and St. Louis
Committee members tried to press some of the executives on future job plans. Bayer and Monsanto representatives did not provide numbers. But they stressed the importance of St. Louis.
Bayer’s Jim Blome repeated the company’s decision to move the North American and seeds headquarters to the region. They are currently in North Carolina, where Bayer says it will keep a significant presence.
Monsanto’s Fraley also referred to the headquarters location as a positive for the St. Louis area including the Chesterfield research site, which is undergoing a $400 million expansion.
“This will be an incredible opportunity to drive innovation.”
The Bayer-Monsanto deal was announced last week. It still needs regulatory approval in the U.S. and dozens of other countries. If that happens, the acquisition could close next year.
Copyright 2016 St. Louis Public Radio
