Bayer Wins U.S. Approval for Monsanto After Two-Year Quest
(Bloomberg) -- Bayer AG won U.S. antitrust approval for its $66 billion takeover of Monsanto Co., clearing the last major regulatory hurdle to forming the world’s biggest seed and agricultural-chemicals provider after a nearly two-year global review.
The companies reached a settlement with the Justice Department that resolves the government’s concerns that the merger as initially structured would harm consumers and farmers, the U.S. said in a statement Tuesday. The agreement requires the sale of assets to BASF SE that Bayer has previously announced. The divestiture package is worth about $9 billion, the largest in a U.S. merger enforcement case, the government said.
"America’s farm system is of critical importance to our economy, to our food system, and to our way of life," Makan Delrahim, the head of the department’s antitrust division, said on a call with reporters. "American farmers and consumers rely on head-to-head competition between Bayer and Monsanto."
For Bayer, acquiring Monsanto is the last step in a corporate transformation as the 154-year-old company shed its plastics business and remade itself as a life-science company with equally-sized health and agriculture units. Once the deal is through, three global behemoths will dominate the world’s agriculture industry, a prospect that has left farmers worried about the possibility of higher prices and less choice.
National Farmers Union, the second-biggest U.S. farmer group, criticized the Justice Department Tuesday for "continued rubber-stamping" of mergers in food and agriculture.
"This extreme consolidation drives up costs for farmers and it limits their choice of products in the marketplace," the group said in a statement. "We will now focus our efforts on ensuring the promises made by Bayer and Monsanto throughout this approval process are kept."
California officials said on Tuesday that they would "carefully" examine the Justice Department agreement. The state’s attorney general, Xavier Becerra, said in a statement that "this deal could further suffocate competition in the agricultural sector." State attorneys general have the authority to challenge mergers in court.
The settlement came together after Justice Department antitrust officials pressed for significant divestitures to remedy the competition problems from combining the two companies. The companies have received antitrust approval from most jurisdictions around the world. Bayer has said it’s confident the deal will close by the June 14 deadline.
Bayer expects to receive the approvals it needs from Canada and Mexico in the coming days, according to a statement from the Leverkusen, Germany-based company. The European Union approved BASF as the buyer of the assets Tuesday.
Bayer can then close the deal once it has the remaining approvals even though the integration of the two companies won’t happen until the BASF divestitures are finished, which will probably be in about two months. Monsanto, based in St. Louis, said it was pleased with the U.S. approval.
Bayer shares rose 2 percent to 100.84 euros at 9:22 a.m. in Frankfurt trading on Wednesday.
The Monsanto takeover extends a series of tie-ups in the agricultural industry. Last year, U.S. and EU regulators approved two other major deals in the sector, Dow Chemical Co.’s merger with DuPont Co. and China National Chemical Corp.’s takeover of Syngenta AG. With about $48 billion in sales from their combined businesses, Bayer and Monsanto will surpass those of both DowDuPont Inc. and China National.
The Justice Department said without the asset sales, the merger would have created a range of competitive harms. Both companies sell seeds and chemicals to farmers, and the combination would have raised prices and reduced choice, the U.S. said. The deal as initially proposed also would have combined Bayer’s seed treatments with Monsanto seeds, giving Bayer the incentive and ability to raise prices that rival seed companies pay for treatments, the government said.
Both companies also compete in developing technology that improve crop yields for farmers, the government added.
"When BASF combines the divestiture assets with its existing portfolio of crop protection products, it will have the breadth of product offerings to step into Bayer’s shoes and be an effective competitor to the other integrated agricultural technology companies," Delrahim said.
Bayer initially agreed in October to sell some of its seed and chemical businesses to BASF for 5.9 billion euros ($6.8 billion). The deal included the Liberty herbicide brand, cotton and soybean seeds, and seed-trait and breeding capabilities.
Then in April, Bayer said it was selling more pieces of its agricultural business to BASF for as much as 1.7 billion euros to satisfy regulators. That deal covered Bayer’s vegetable-seeds business, other herbicides, research on wheat hybrids, and Bayer’s digital farming business.
The businesses Bayer is selling to its competitor had combined sales of 2.2 billion euros last year and employ about 4,300 people, according to the company.
Bob Young, president of consulting firm Agricultural Prospects in Grasonville, Maryland, said the merger is a good idea given that DowDuPont deal was approved. Currently, only DowDuPont has the advantage of streamlining both seed and chemical research and development within one company.
“If you were going to let Dow-DuPont go forward, then you probably want this one to go forward, too,” Young said.
Friends of the Earth, an environmentalist group, criticized the government’s decision to approve the merger, calling it a "toxic mega-merger" that will hurt farmers and consumers.
"The DOJ’s weak divestment requirements will do nothing to stop Bayer-Monsanto from controlling more and more of our food system," Tiffany Finck-Haynes, senior food futures campaigner with Friends of the Earth, said in a statement. "This merger will damage the bargaining power of family farmers, prevent farmers from accessing diverse seed varieties, and allow seed prices to rise."
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