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Mergers & Acquisitions

Bayer clears path to clinch Monsanto acquisition by divesting more to BASF

BASF will buy agrochemical and seed businesses for $2 billion

by Alex Scott
May 6, 2018 | APPEARED IN VOLUME 96, ISSUE 19

Bayer has agreed to sell a second tranche of agrochemical and seed businesses to BASF for $2 billion. The move should enable Bayer to satisfy European Union competition rules and complete its $63.5 billion deal to acquire Monsanto—first announced in September 2016—by July.

Bayer already agreed in October 2017 to sell significant parts of its seed and pesticide business to BASF for $7 billion in a bid to satisfy EU regulations.

In the new divestment round, Bayer will sell to BASF assets including its global vegetable seed activities, certain seed treatment products, its research platform for wheat hybrids, three herbicide research projects, and its digital farming business. Together, they generated 2017 sales of $900 million.

Bayer Chairman Werner Baumann is confident his firm has now done enough to satisfy regulators and enable it to complete the Monsanto deal.

The latest sell-off to BASF will involve the transfer of 2,500 employees. Under the agreement, BASF is required to maintain all permanent jobs for at least three years after the deal closes.

In its October 2017 deal, Bayer agreed to sell to BASF its global glufosinate herbicide business and the related LibertyLink technology for herbicide tolerance, together with almost all of the company’s field crop seed operations. These businesses generated sales in 2017 of $1.8 billion.

The combined Bayer-Monsanto company is set to have $26 billion per year in crop-related sales—55% from crop protection chemicals and 45% from seeds.

Once it has acquired Bayer businesses from both deals, BASF will have annual agriculture-related sales of about $10 billion with a dedicated workforce of 12,000 employees. Prior to the latest deal, German investment bank Berenberg forecast that the acquisition of Bayer agrochemical assets would be a profits booster for BASF.

Ironically, the BASF acquisitions are themselves so large that they are subject to approval. To satisfy European regulators, BASF has agreed to divest Trunemco, a nematicidal seed treatment now in development, and some research into nonselective herbicides.

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