Will Consolidation Force Bayer’s Hand?

23.12.2015 -

Bayer is likely to seek a major life sciences M&A deal in the next few years, banking sources have told the news agency Reuters. The German group’s absence from a recent wave of consolidation could undermine its position in markets such as crop protection and animal health, they said.

As possible targets, Reuters’ sources identified veterinary drug firm Zoetis and Pfizer's consumer health business.

Bayer, along with several other top-seeded agricultural chemicals players, is seen as challenged by the planned merger of US rivals Dow and DuPont. While creating a stronger rival, the merger of giants is also narrowing the list of potential deal partners for others.

A takeover by Bayer of another company in agricultural chemicals would present antitrust hurdles. Syngenta and Bayer each command about a fifth of the global pesticides market, with Bayer leading the insecticides segment with a 23% share.

In animal health, Reuters points out, Bayer is set to become a second-tier player behind four clear market leaders following a series of major consolidation moves in the sector, capped by the exclusive talks between Sanofi and Boehringer Ingelheim to combine some businesses in a $20 billion asset swap.

At the same time, the investment bankers note that Bayer's strategy chief and CEO-in-waiting Werner Baumann may be content to bide his time. The German group’s agriculture business is one of the most profitable and in healthcare it is still digesting last year’s $14 billion purchase of Merck & Co's consumer health business.