Bayer, Monsanto Must Overcome Incredible Hulk, Regulators

  • Actor Ruffalo among activists criticizing ‘#mergerfromhell’
  • Deal likely to face lengthy review from antitrust regulators

The M&A Outlook As Bayer-Monsanto Deal Moves Closer

Bayer AG and Monsanto Co. never thought they’d have to take on The Incredible Hulk to get a possible merger cleared by EU and U.S. antitrust regulators.

Mark Ruffalo, who played the green giant in two of Marvel’s “Avengers” films, was one of many people calling on EU antitrust chief Margrethe Vestager and U.S. Department of Justice Attorney General Loretta Lynch to “shut down this #mergerfromhell” with hundreds of tweets this month.

Mark Ruffalo attends the European premiere of "The Avengers: Age Of Ultron" in London, on April 21, 2015.

Mark Ruffalo attends the European premiere of "The Avengers: Age Of Ultron" in London, on April 21, 2015.

Photographer: Samir Hussein/Getty Images

Bayer is getting closer to acquiring Monsanto in a deal that would create the world’s biggest producer of seeds and pesticides, people familiar with the matter said earlier Tuesday. An agreement could be reached in the next two weeks that would pave the way for the companies to start seeking antitrust approval, which could be a lengthy process.

Bayer’s head of crop science Liam Condon played down the antitrust review earlier this year, telling Frankfurter Allgemeine Zeitung in June that the companies had "highly complementary" product pipelines and regional distribution. Possible competition issues may require a sale of small divisions, he said.

Consumer Groups

Environmental and consumer groups, however, are calling for regulators to block the deal outright. Members of the European Parliament have started online petitions claiming the transaction "would dominate the seed market in Europe" and limit choice in an already concentrated industry.

Any Bayer-Monsanto deal would follow two other billion-dollar acquisitions in the agricultural industry, China National Chemical Corp.’s $43 billion takeover of Syngenta AG and Dow Chemical Co.’s merger with DuPont Co. to create the world’s biggest chemical company.

"Given that the ostensible aim of this merger is market dominance, it’s hard to see how some token splits would ease concerns," said Richard More O’Ferrall, a spokesman for the Green Party in the European Parliament.

Brandon Mitchener, a spokesman for Monsanto in Brussels, brushed aside criticism from environmental groups.

"Speaking hypothetically, I find it difficult to see how an acquisition of a company whose seeds help feed the world by a company whose products help keep us all healthy longer could be anything less than saintly," Mitchener said.

The European Commission declined to comment before a transaction has been filed. Bayer declined to comment because a deal isn’t final.

SumOfUs

Antitrust lawyers financed by consumer group SumOfUs argued that Bayer and Monsanto already account for 70 percent of U.S. acreage for cotton. A deal would increase Monsanto’s dominance in herbicides and genetic traits for seeds and eliminate direct competition between the two firms, harming future research and development. A likely result would be "higher input prices, less choice and higher food prices."

Opposition from environmentalists is nothing new for Bayer or Monsanto. European campaigners have called for regulators to stop the production of genetically-modified plants developed by both companies. Greenpeace has also demanded Bayer stop selling pesticides that the group says harm bees and called for bans of Monsanto’s Roundup weedkiller.

EU Regulators

EU merger regulators usually insist that their reviews must be based on the facts and that they aren’t swayed by noisy campaigns or political attempts to pressure them.

Vestager told Green lawmakers in June that her goal was to ensure that European consumers had access to quality food at affordable prices and that she’d "very carefully investigate" a Bayer-Monsanto bid as well as Dow-DuPont and ChemChina-Syngenta.

"We will consider the concerns you have raised over the effects of the Bayer-Monsanto merger on prices, the variety of available seed products as well as on research and development," Vestager said in the June 20 letter to the two German politicians that they posted online.

At the very least, a Bayer-Monsanto deal may get an in-depth EU probe, which could take some six months to gather evidence from rivals and customers. Regulators could then demand the companies address any potential issues with divestments or changes to future behavior that could allow it to be cleared.

A possible template is the EU’s in-depth inquiry into Dow’s bid to merge with DuPont. Earlier this month, regulators cited precise concerns over worm products, development of fungicides, licensing of gene-editing technologies, how complementary crop protection products and seeds are sold and specialty petrochemical products used for packaging and glue.

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