Bayer's Monsanto acquisition is a win-win for their Indian investors
In India, seeds is a faster growing industry than crop chemicals. In India, the seeds industry is growing at 15% and agro chemicals in single-digits.
By Jwalit Vyas, ET Bureau | Updated:
ET Intelligence Group: Bayer AG's acquisition of Monsanto is a positive for their Indian listed subsidiaries Bayer Cropscience and Monsanto India. The reason behind Bayer's acquisition is to widen its portfolio from agro-chemical 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 agro chemicals in single-digits. The Indian agro chemical industry is $2.5 billion and seeds is $2 billion. So the acquisition is a positive for Bayer's shareholders.
Bayer CropScience, the Indialisted subsidiary of Bayer AG, too has seeds business, though it is just around 12-15% of its total revenue. In case of Monsanto, all the different seeds are in the portfolio of the listed company except cotton seeds which is 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 accord ing to industry trackers. It also faces allegations against the seed technology . Bayer, on the other hand, has a good hold on distribution by creating 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 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 twoweeks prior to the date of the public announcement.
On Wednesday, Monsanto India's stock closed at Rs 2,572.3, 9.9% higher tha the previous day's close, while Bayer closed at Rs 4,110.8, up 1%.
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 agro chemicals in single-digits. The Indian agro chemical industry is $2.5 billion and seeds is $2 billion. So the acquisition is a positive for Bayer's shareholders.
Bayer CropScience, the Indialisted subsidiary of Bayer AG, too has seeds business, though it is just around 12-15% of its total revenue. In case of Monsanto, all the different seeds are in the portfolio of the listed company except cotton seeds which is 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 accord ing to industry trackers. It also faces allegations against the seed technology . Bayer, on the other hand, has a good hold on distribution by creating 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 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 twoweeks prior to the date of the public announcement.
ADVERTISEMENT
On Wednesday, Monsanto India's stock closed at Rs 2,572.3, 9.9% higher tha the previous day's close, while Bayer closed at Rs 4,110.8, up 1%.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
Related Articles
Monsanto: See what we know so far about plot, cast and productionADVERTISEMENT
