Business & Real Estate

Bayer buying Monsanto in mega-deal that affects Davis, Sacramento

Bayer Crop Science’s $12 million greenhouse in West Sacramento opened in February. Monsanto also has operations in the Sacramento region.
Bayer Crop Science’s $12 million greenhouse in West Sacramento opened in February. Monsanto also has operations in the Sacramento region. Sacramento Bee file

Bayer and Monsanto, two agribusiness giants that employ hundreds of crop scientists and other workers in Davis and greater Sacramento, announced a mega-merger Wednesday that is likely to shake up the region’s burgeoning farm-technology industry.

The $66 billion deal unites two companies that sell billions of dollars worth of seeds, pesticides and other farm products – businesses that go to the very heart of the ag-tech sector gaining traction in the Davis-Sacramento area. Monsanto’s operations in Davis have their roots in the earliest rumblings of biotech in the region, going back to a genetically modified tomato created in the 1980s.

“The combination is going to create the global leader in agriculture,” said Bayer Chief Executive Werner Baumann in a conference call with reporters. The deal was initiated by Bayer, which is paying $128 a share in an all-cash transaction for Monsanto. The deal must be approved by regulators and Monsanto’s shareholders.

The impact on the two companies’ operations in Davis, Woodland and other Northern California communities remains to be seen. A Bayer spokesman at the company’s headquarters in Germany said it’s too early to predict.

At the same time, though, Bayer said it expects to squeeze $1.5 billion in “total synergies” from the merger over three years – corporate-speak for cost savings.

“I do worry about the impact of the stated $1.5 billion in synergies,” said veteran Davis biotech executive Pam Marrone, founder of a crop-pesticide company that was sold to Bayer in 2012. Marrone, now chief executive of Marrone Bio Innovations Inc., said there is considerable overlap between Monsanto and Bayer’s operations in the region.

She said the merger also could create opportunities for small companies such as Marrone Bio, a maker of environmentally friendly pesticides. “As the big get bigger, it can be positive for small, agile companies,” Marrone, a former Monsanto scientist, said in an email. “We can move more quickly and continue to strive to lead in innovation.”

Several other small companies have set up shop in Davis and greater Sacramento, drawn in part to the research and talent pool at UC Davis. They include Arcadia Biosciences, a maker of seeds designed to improve yields and drought tolerance; and Bee Vectoring Technologies International Inc., a tiny maker of pesticides that’s moving many of its operations to West Sacramento from Canada.

Tuesday’s merger announcement capped a lengthy courtship by Bayer, whose previous offers had been rebuffed by St. Louis-based Monsanto. The German company is spending $57 billion to buy Monsanto. Including the assumption of Monsanto’s debt, the deal is worth $66 billion.

While primarily known as a drug company, Bayer has agricultural businesses in its home country of Germany and elsewhere, including extensive operations in Davis, Sacramento, Woodland and other parts of Northern California. Its 200-employee Bayer Crop Science research center in West Sacramento is the result of its $425 million purchase of Pam Marrone’s first company, AgraQuest.

Earlier this year, the company launched a $12 million expansion of its West Sacramento greenhouse aimed at developing new varieties of “green” pesticides that could supplant traditional chemical products.

Monsanto is one of the world’s leaders in agriculture and biotech, known for such products as the weedkiller Roundup. Its leadership role in genetically modified organisms has made it the frequent target of anti-GMO protesters in Northern California and elsewhere. Just last year several dozen environmentalists staged a protest outside its Woodland plant, blocking the entrance for several hours.

The company’s presence in the Sacramento region stems from its late 1990s takeover of Davis biotech pioneer Calgene, which developed what is believed to be the world’s first biotech food product, a longer-lasting tomato known as the Flavr Savr.

The Flavr Savr’s slow-ripening quality was touted as the antidote to food spoilage. But developing the product essentially bled Calgene dry, consuming more than $150 million in startup costs. The tomato, marketed under the brand name MacGregor’s, suffered from poor crop yields and other problems. In 1997, three years after the tomato’s commercial release, Calgene was forced to sell out to Monsanto. The Flavr Savr was yanked off the market.

Monsanto still operates under the Calgene name, although it moved most of the subsidiary’s workers to a 300-employee research site in Woodland two years ago. It also operates seed subsidiaries under the Seminis brand in Woodland and Williams, along with a separate subsidiary in Roseville.

The fate of these operations remained a mystery Wednesday.

“We are not able to tell anything about the future of any sites right now,” said Günter Forneck, a spokesman at Bayer’s headquarters in Germany. “This will take months to come to a point where we will be able to say we have a better view.” A spokesman for Monsanto couldn’t immediately be reached for comment.

The companies did say their seeds division would be based in St. Louis and the crop protection business would be based in Germany, with “an important presence in Durham, North Carolina, as well as many other locations throughout the U.S. and around the world.” The companies’ “digital farming” businesses, which develop software platforms for farm management, will be based in San Francisco.

Al Rojas of Sacramento talks during an anti-GMO rally at the Monsanto plant in Woodland on Thursday, May 21, 2015. About 70 people blocked the entrance to the company and marched down Main Street in Woodland. Video by Hector Amezcua, The Sacrament

Dale Kasler: 916-321-1066, @dakasler