This is the end of Monsanto as the world has known it…
Bayer, Monsanto’s new owner, announced on Monday that it’d be doing away with the brand name in as soon as August. That’s also when its $66 billion acquisition of Monsanto is expected to be complete.
The merger, approved by the Department of Justice last week, will create the largest seed and agrochemical company on Earth. It combines Bayer’s pesticide business with Monsanto’s genetically modified crop portfolio.
In the process of amassing that portfolio, Monsanto had become one of the most-hated large companies in the entire world.
Its name was regularly strewn across protest banners and evoked in arguments against the alleged harmful effects of pesticides and genetically modified organisms (GMOs).
According to Liam Condon, president of Bayer’s Crop Science division, the decision to drop the Monsanto name is part of a wider campaign to win back consumer trust. During a call with journalists on Monday, he said:
The more important point now, once we change the company name, is that we talk about what the new company will stand for. Just changing the name doesn’t do so much — we’ve got to explain to farmers and ultimately to consumers why this new company is important for farming, for agriculture and for food, and how that impacts consumers and the environment.
Condon sees the acquisition as an opportunity to discuss the disconnect between farmers and consumers:
We’re going to be engaging in a dialog trying to explain why farmers need more innovation, and why it’s ultimately good for consumers. Changing the name is just one step. There needs to be more dialogue and engagement to bring across what the new company stands for.
Monsanto is a major producer of pesticides and genetically modified crops. It sells a package of farm products that have improved yields and cut down on some pest problems.
Established in 1901 as a chemical business, Monsanto had been at the center of some of the biggest scandals of the 20th and 21st centuries.
Monsanto had been vocally criticized by environmentalists who question the safety of GMOs and pesticides, by academics who say the company had unfairly swayed science, and by farmers who claim to have been hurt by the company’s extremely tight control of the genetically modified seed supply.
The chemical Agent Orange, which was weaponized and demonized in the Vietnam War era, was produced under the name Monsanto.
The company was also among those that produced DDT, a banned pesticide that wreaked havoc on many protected species. This included the American bald eagle, which was nearly pushed to extinction.
Most recently, Monsanto faced serious questions about the safety of its marquee weed killer, Roundup, and the unintended environmental effects of another product called Dicamba.
But Monsanto critics say they’ll be watching closely, even when the company will be operating under a new name.
“We’ve been expecting that Bayer would drop the Monsanto name because the company has a poor reputation,” said Wenonah Hauter — the executive director of the nonprofit Food & Water Watch, a frequent Monsanto critic. “But unless they shed Monsanto’s destructive products and business practices too, the Bayer name will become synonymous with environmental and public health disaster.”
Bayer officials issued a release on Monday in which they announced that the company plans to begin the closing process on the Monsanto acquisition on June 7th, after receiving all the necessary approvals over the weekend.
This winds down a mega-acquisition process that began two years ago. The two companies will continue to operate as separate entities for about two months as final divestment deals are completed.
At that point, the highly-charged Monsanto name will be no more.
But as Monsanto’s “death” approaches, Twitter has taken full advantage of the agrochemical company’s market vulnerability.
After the Dow Jones Indices announced that it would be replacing Monsanto in the S&P 500, social media platform Twitter jumped by roughly 5% on Tuesday, hitting a three-year high.
The gains pushed Twitter’s stock to about $39 a share, levels that hadn’t been seen since April 2015. Shares of Twitter are up by nearly 65% year to date and by more than 110% year over year.
The reason? The stock’s inclusion in the S&P 500 means mutual funds and exchange-traded funds (ETFs) that mimic and track the benchmark stock index must now buy Twitter shares to ensure they’ll have the proper weighting in the stock.
The S&P 500, a popular index that many money managers’ performance is compared against, is also viewed as the best gauge of the overall health of the stock market.
Twitter was added to the broad “information technology” sector of the S&P 500, a move that boosts the index’s already sizeable exposure to tech stocks.
So basically, this is great news for Twitter… But not so much for Monsanto.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today