Bayer CEO Sees Monsanto Approval as He Weighs More Asset Sales

(Bloomberg) -- Bayer AG Chief Executive Officer Werner Baumann said he was confident of winning European Union approval for the company’s $66 billion acquisition of Monsanto Co. even as he weighed the sale of more businesses.

Without Monsanto, Bayer said sales and profit growth will grind to a halt this year. The shares dropped as much as 3.7 percent in early trading in Frankfurt on the weak forecast, the most in seven months.

The deal with Monsanto has eclipsed other strategic moves at Bayer and is poised to transform one of the world’s oldest drugmakers -- the inventor of aspirin -- into more of a force in agriculture than it is in pharmaceuticals. The Leverkusen, Germany-based company, which had expected to conclude the Monsanto purchase early this year, said Wednesday it is confident it can allay the concerns of EU antitrust regulators by divesting or out-licensing businesses.

The company said it will sell its entire vegetable-seed unit, aiming to complete the deal in the second quarter. Farming technology and the seed portfolio have emerged as key final details in the talks with European regulators.

“We see ourselves on a good path for the regulatory approvals that are still outstanding,’’ Baumann said. “In Europe, as far as the process goes, we are further along than in the USA, but in the USA we will certainly also make progress in the coming weeks.’’

EU antitrust regulators have decided to give the deal their approval ahead of an April 5 deadline, Reuters reported Wednesday.

Reasonable Approach

“We think we have a reasonable approach” toward a conclusion with European authorities, said Liam Condon, chief of Bayer CropScience. EU authorities still need to make a final decision, he said.
 
Meanwhile, its pharmaceuticals unit -- in recent years a growth driver -- is dealing with a U.S. Food and Drug Administration warning letter, its agriculture business is still regaining its footing after a challenging 2017, and consumer health unit is struggling to compete, especially in the U.S.

Even without Monsanto’s help, the company predicted its agriculture unit will grow again this year after seeing sales and profit drop last year due to a tough business environment in Brazil. On a group level, adjusted earnings before interest, taxes, depreciation, amortization this year will probably be in line with 2017, while sales will be little changed at about 35 billion euros ($43 billion), Bayer said.

The prescription-drug division, still Bayer’s biggest unit, was a bright spot last year. Unit sales climbed 4.3 percent to 16.8 billion euros, driven by a spike in revenue from blood thinner Xarelto, eye medicine Eylea and the cancer drugs Xofigo and Stivarga.

This year, however, profit from prescription drugs will probably fall, Bayer said. That’s partly because of remediation measures needed after the U.S. Food and Drug Administration found manufacturing practice violations at its Leverkusen factory. Addressing the FDA’s concerns will drive Ebitda down by about 300 million euros, Bayer said.

Sales of over-the-counter medicines and self-care products will probably be on level with last year once currencies and portfolio changes are taken into account, and profit from that business will decline again in 2018, Bayer said.

Last year’s Ebitda before special costs fell 0.3 percent to 9.3 billion euros, matching the average estimate of analysts surveyed by Bloomberg.

--With assistance from Aoife White

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, John Lauerman

©2018 Bloomberg L.P.