Bayer Clears EU Hurdle for Monsanto Deal With Sale to BASF

Updated on
  • EU says Bayer needs to prove BASF will be suitable buyer
  • Companies must still win U.S., Russian approval for deal
European Commissioner for Competition Margrethe Vestager explains the decision.

Bayer AG cleared one big hurdle for its $66 billion takeover of Monsanto Co., winning European Union approval for the deal after agreeing to bolster BASF SE by selling vegetable seeds, pesticides and digital agriculture technology to the world’s largest chemical company.

Buyer and seller “need to provide further evidence” of BASF’s ability to build an important competitor for the enlarged Bayer in order for the seed transaction, worth more than 6 billion euros ($7.4 billion), to gain approval, the EU said. The EU didn’t specify a buyer for Bayer’s vegetable-seeds unit. Bayer has suggested BASF should take it over.

“We need competition to ensure farmers have a choice of different seed varieties and pesticides at affordable prices,” said EU Competition Commissioner Margrethe Vestager. The companies’ concessions allayed antitrust concerns “in full” by making sure that the number of global players remains the same, according to Vestager.

The deal is the last of three big agricultural transactions that are reshaping global farming. DuPont Co. had to sell most of its global research and development operations to placate EU concerns over its merger with Dow Chemical Co. last year. China National Chemical Corp. also divested some overlapping products to win approval for its Syngenta AG bid.

Bayer shares fell 0.2 percent to 94.03 euros at 2:18 p.m. in Frankfurt. Monsanto’s stock was little changed in New York trading.

U.S. Regulators

Bayer and Monsanto must still convince U.S. regulators who are pushing for the companies to divest more assets to resolve antitrust concerns, a person familiar with the probe said last week. Bayer is suing the Russian antitrust watchdog over an order for it to share technology with Russian companies.

Any U.S. antitrust hesitation is probably “more about timing than about blocking the deal,” Ulrich Huwald, an analyst with Warburg Research in Hamburg, said of reports that the Department of Justice is taking a closer look at the deal. “A political delay.”

Bayer said it’s still aiming to complete the Monsanto acquisition by the end of the second quarter and has scheduled its earnings presentation for Sept. 5 -- an unusually late date for the German company, which usually reports quarterly results in July.

“Receipt of the European Commission’s approval is a major success and a significant milestone,” Chief Executive Officer Werner Baumann said in an emailed statement. The company said it’s working closely with the U.S. regulator.

‘Merger From Hell’

Wednesday’s merger decision is arguably Vestager’s most controversial one to date. Environmentalists, including Hollywood actor Mark Ruffalo, have bombarded her with tweets, emails, letters and postcards begging her to block a “merger from hell” that threatens to harm human health, farming and the environment. Vestager said many of these concerns went beyond competition policy and the Bayer-Monsanto merger.

The EU’s decision has allowed Bayer, Monsanto and BASF “to become data giants in agriculture, the Facebooks of farming, with all the pitfalls that entails,” said Adrian Bebb of Friends of the Earth Europe. Creating massive farm-data collection platforms will let the companies increase control over farmers and cut out competitors, he said.

BASF is lined up to buy Bayer’s global broadacre seeds and traits, including its research and development operations. The divestment plan covers oilseed rape, cotton, soybean and wheat as well as Bayer’s research on genetically modified traits. BASF will also purchase Bayer’s glufosinate assets and three research lines for herbicides, designed to replace glyphosate, a weedkiller that some European countries are moving to ban.

BASF will also take over Monsanto’s Nemastrike unit to protect seeds from worms. It will license a copy of Bayer’s digital agriculture operations and research pipeline. This will allow “BASF to replicate Bayer’s position in digital agriculture” in Europe, the EU said, and ensure the race “in this emerging field remains open.”

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