Photo from Flickr user andrepierre.
Days before entering office, President Donald Trump held a meeting with executives from agrochemical giants Bayer and Monsanto. The companies sought Trump’s blessing for their $66 billion merger, promising to create thousands of jobs if the merger is approved. But the companies’ track records, as well as evidence from past mergers, suggest the deal would likely result in a net job loss.
The companies’ CEOs reportedly promised President Trump that if the merger is approved, the company will spend $8 billion on research and development in the U.S. over the next six years. The companies already spend about that much on R&D in the U.S. They also promised to keep all of Monsanto’s 9,000 jobs in the St. Louis area, and add 3,000 “high-tech” American jobs. They did not, however, define what exactly they mean by “high-tech.”
Diana Moss, the president of the American Antitrust Institute, is “skeptical” that any job creation will result from the Bayer/Monsanto deal. She says that in order to win approval for such mega-mergers, companies must identify efficiencies to justify the deal. Those efficiencies generally come in the form of cost cutting. In the case of Bayer and Monsanto, she says the cost cutting that “all merging parties are going to claim as a result of the merger will most likely result in job loss.”
Indeed, recent Monsanto layoffs suggest the company was trimming costs even before the merger announcement. Monsanto laid off around3,600 workers in late 2015 and early 2016, which the company justified as part of a cost cutting initiative. The layoffs came just a few months before the May 2016 announcement of the company’s merger with Bayer.
Other recent mega-deals provide insight into whether this merger will create new jobs. Just a few months after Heinz bought a controlling stake in Kraft in March 2015, the company laid off 2,500 employees. Another 200 employees were laid off in August 2016. The company said that the layoffs were meant to “[eliminate] duplication” and cut costs—the kind of efficiencies Monsanto and Bayer will have to prove in order to win approval for their deal. There is evidence that Heinz has added a couple hundred jobs since the layoffs, but the total remains far below the number eliminated.
Job cuts also followed soon after Dow and DuPont announced their merger in 2015. In the months following the announcement of the agrochemical mega-merger, DuPont cut 1,700 of 6,000 jobs at its Delaware facilities, including as many as 700 in R&D, as part of a company-wide cost cutting initiative. These recent cuts are only the latest of many merger-related job losses. In January 2009, Pfizer took over Wyeth for $68 billion, resulting in 19,000 jobs cut. And in March 2009, Merck & Co. bought Schering-Plough for $41 billion, ultimately eliminating a further 16,000 jobs.
The fact that Trump even held a meeting with Bayer and Monsanto executives outraged many antitrust and environmental advocacy groups. They felt the back channel meeting demonstrated Trump’s disregard for the merger approval process, which is supposed to be managed not by the White House but by the Federal Trade Commission and the Department of Justice. Diana Moss says the meeting was “political maneuvering to curry favor with the administration.” The National Farmers Union called the meeting “deeply disturbing,” and urged the President to reject the merger. The Natural Resources Defense Council criticized the President-Elect’s involvement in negotiating the deal, emphasizing the need to “ensure the integrity and independence” of the antitrust review process.
The merger of these two companies, along with the proposed Dow/DuPont and ChemChina/Syngenta mergers, would reshape the market for seeds and fertilizers. A joint Bayer-Monsanto would own 29% of the global seed market and 25% of the global pesticide market. A study from Texas A&M University in September 2016 found that the price of cotton could rise nearly 20% if the merger is approved.
In the U.S., Monsanto is already dominant in seed production and sales. Monsanto seed traits can be found in around 80% of planted corn and 90% of planted soybeans in the U.S.
As we’ve reported, these mergers could also amplify the anti-competitive effects of cross-licensing, a practice in which agrochemical companies prevent direct competition by “stacking” seeds with genetic traits owned by multiple companies. The prevalence of seeds with stacked traits planted in the U.S. skyrocketed between 2000 and 2015, rising from 1% to 77% in corn planting and 20% to 79% in cotton.
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