By Christopher Alessi
FRANKFURT — Bayer AG’s big push into the U.S. agrochemical market with its planned acquisition of Monsanto Co. could help it offset a growing problem on its home turf: increasingly stringent European regulation.
The oversight has been driven by fierce public resistance in the European Union to pesticides and other crop- protection chemicals. Most genetically modified crops are banned throughout Europe, and EU officials are debating whether to do the same with next generation genetic technologies.
The regulatory environment, along with low crop prices in North America, has helped drive a wave of consolidation in the agrochemicals industry.
Bayer’s planned tie-up with Monsanto, valued at $ 66 billion including debt, comes as rivals Dow Chemical Co. and DuPont Co. are pursuing a merger and after Swiss pesticide group Syngenta AG agreed earlier this year to be acquired by China National Chemical Corp.
“Consolidation has been a topic around for a while because productivity and R&D was going down [and] new technologies require investment,” Mr. Condon said.
The one major player in the agriculture sector that so far has remained on the sidelines is German competitor BASF SE, the world’s largest chemicals company by sales.
The head of BASF’s crop division, Markus Heldt, said earlier this month that BASF potentially would be interested in acquiring smaller business units that Bayer and Monsanto may need to divest themselves of in response to competition concerns.
But BASF’s agriculture division would likely still be significantly smaller than Bayer’s after the planned merger, experts say.
The Bayer-Monsanto deal would allow the two companies to pool resources to increase research and development and investment in technology, with the prospect of bringing new seed and crop products more quickly to market, said David Zaruk, a professor at Université Saint-Louis in Brussels.
Mr. Zaruk said smaller seed and crop companies in Europe mostly have been priced out of the market and must team up with multinationals to get their products out because of the hundreds of millions of euros it can cost to comply with regulatory standards.
Even Bayer and Monsanto separately “were ultimately too small” to innovate and succeed in the European market, he said.
Graeme Taylor, public affairs officer at industry-lobbying group European Crop Protection Association, said, ” There’s a huge challenge for the industry in terms of innovation. It costs the best part of EUR200 million ($ 223.1 million) and 11 years to successfully bring a new product to market.”
Mr. Taylor said the process for getting pesticides and herbicides approved for use in the EU had been “hijacked by politics,” in lieu of science. He cited the example of glyphosate, a weed killer that has faced protracted regulatory review.
Activists and others opposed to crop chemicals have lobbied Brussels to restrict glyphosate because they argue it is carcinogenic. The United Nations Food and Agriculture Organization and the World Health Organization concluded in a report in May that glyphosate is “unlikely to pose a carcinogenic risk to humans from exposure through diet.”
Public fear of glyphosate, which Monsanto produces and sells, helped fuel resistance to Bayer acquiring Monsanto by some European environmental activists.
The pesticide industry “has been deceiving the public for years that these poisonous chemicals are ‘safe’,” said Angeliki Lysimachou, an environmental scientist at the European division of the Pesticide Action Network, in an email. ” The bigger the company, the further it will go to deceive people and increase its profit.”
Bayer has a more-positive reputation than Monsanto among the European public, although it also makes glyphosate products, in part because it is known for products beyond agrochemicals such as pharmaceuticals. Outside Europe, Bayer is also a major manufacturer of genetically modified crops, in which new genes are introduced into an organism.
All of the major agriculture companies, including Bayer and Monsanto, are exploring new breeding technologies, in which a plant’s own genes are rearranged. “That could change how a plant reacts to mites, for example,” Mr. Zaruk said.
But unlike in the U.S., approval of the technique is on hold in Europe.
Write to Christopher Alessi at christopher.alessi@wsj.com
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