Bids and deals: argochemical sector

The agrochemical sector, which makes seeds and pesticides, has come alive with mega-deals. Last week, German chemicals giant Bayer, which specialises in herbicides, launched a $62bn bid for US-based Monsanto. This follows a $130bn merger last year between Dow Chemical and DuPont, two American chemical giants, while ChemChina has launched a $43bn bid for Switzerland's Syngenta.

Investors have long seen agrochemical firms as a way to bet on rising populations and greater demand for food. Sector consolidation could boost potential returns further by lowering competition. If Bayer's bid for Monsanto were to go through, the number of globally dominant firms in the niche could shrink from six to just three.

Still, obstacles to this deal are manyfold. Monsanto has rebuffed Bayer's bid, which already looks pricey. Even if Bayer offers a higher price, US regulators could halt a deal: they intervened in 2007 when stopping Monsanto from buying a rival cotton seed producer, on the grounds that the combination would be too big, squeezing US farmers. So investors in Monsanto shouldn't bet on a higher offer.

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