As Monsanto Sees No End to Low Crop Prices, FMC Expects Rebound

Bayer, Monsanto CEOs on Getting Deal Done
  • Monsanto-Bayer deal comes as corn, wheat are at multiyear lows
  • Pesticide maker FMC says agriculture markets poised to recover

Monsanto Co. agreed to sell itself as crop prices trade at multiyear lows because there is no telling when agriculture markets will recover, Chief Executive Officer Hugh Grant said. Rival FMC Corp. begs to differ.

As Grant and executives from acquirer Bayer AG were explaining why they struck a $56 billion deal amid depressed prices for seeds and pesticides, FMC Chief Financial Officer Paul Graves was telling investors in New York that global agriculture markets are poised to rebound.

“It feels like the worst is behind us and we see a more positive market environment as we look towards 2017,” Graves said Wednesday on a webcast from a Credit Suisse Group AG Conference.

Timing the sale of St. Louis-based Monsanto to coincide with an upswing in agriculture markets would be impossible, Grant said Wednesday in a CNBC interview. Crop prices have languished for four years, with corn prices the cheapest in a decade and wheat at a five-year low, he said.

“I think it’s a mistake to try and time commodity markets,” Grant said in the interview. “Who knows how long this is going to take to turn?”

Offering a contrasting view, FMC’s Graves said farmer demand in Europe and Asia is growing and previously weak Latin American markets have stabilized. North America remains challenging, he said.

‘Improving Environment’

“We remain confident that the crop protection chemical markets will rebound in the coming years,” Graves said. “I’m certainly not about to predict a rapid rebound next year. But most early indicators, and I stress they are early indicators, point to a gradually improving environment for FMC.”

Bayer is paying $128 a share, a 44 percent premium to Monsanto’s closing price on May 9, the day before the German company’s first bid. That’s 18.6 times earnings before interest, taxes, depreciation and amortization for the most recent 12-month period, or 16.5 times next year’s estimated Ebitda, Bayer CEO Werner Baumann said on the conference call.

Monsanto rose 0.8 percent to $106.99 at 3:20 p.m. in New York. Bayer gained 0.3 percent to 93.55 euros at the close in Frankfurt. FMC was 2.4 percent higher at $45.98.

The deal is valued at $66 billion including the assumption of Monsanto’s debt.

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