DOJ approves Bayer purchase of Monsanto
May 29, 2018
The Justice Department today approved Bayer AG's acquisition of Monsanto as long as Bayer sells approximately $9 billion in businesses and assets to BASF.
In announcing the approval of Bayer's plan to pay $66 billion to take over Monsanto, the Justice Department emphasized the required divestitures.
In a news release, the Justice Department said, "The proposed divestiture to BASF, an experienced chemical company with a substantial crop protection business, will fully resolve all horizontal and vertical competition concerns. As a result, American farmers and consumers will continue to benefit from competition in this industry."
"This comprehensive structural solution to significant horizontal and vertical competition concerns — the largest merger divestiture ever required by the United States — preserves competition in the sale of these critical agricultural products and protects American farmers and consumers," said Assistant Attorney General Makan Delrahim of the Antitrust Division.
“Without the agreed-to divestitures, the proposed merger would likely result in higher prices, lower quality, and fewer choices across a wide array of seed and crop protection products. The merger also threatened to stifle the innovation in agricultural technologies that has delivered significant benefits to American farmers and consumers.” Justice Department
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"We commend the parties for working with the Antitrust Division to resolve our concerns on behalf of American consumers."
The Antitrust Division today filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed transaction, while simultaneously filing a proposed settlement that, if approved by the court, would resolve the department's competitive concerns.
The Justice Department also said, "Without the agreed-to divestitures, the proposed merger would likely result in higher prices, lower quality, and fewer choices across a wide array of seed and crop protection products. The merger also threatened to stifle the innovation in agricultural technologies that has delivered significant benefits to American farmers and consumers."
Under the terms of the proposed settlement, Bayer must divest those Bayer businesses that compete with Monsanto today. These include Bayer's cotton, canola, soybean, and vegetable seed businesses, as well as Bayer's Liberty herbicide business, a key competitor of Monsanto's well-known Roundup herbicide.
The settlement also requires structural divestitures to remedy the competitive harm that would result from the vertical integration of certain significant Bayer seed treatment businesses with Monsanto's leading seed businesses.
Additionally, because Bayer and Monsanto currently compete to develop new products and services, the settlement requires the divestiture of certain intellectual property and research capabilities, including "pipeline" R&D projects.
Finally, in order to fully prevent competitive harm from the merger, the settlement requires the divestiture of additional complementary assets that are needed to ensure that BASF has the same innovation incentives, capabilities and scale that Bayer would have as an independent competitor including, most notably, Bayer's nascent "digital agriculture" business.
The Justice Department also released documents related to the deal. (See links below.)
Bayer in a news release said the company "obtained conditional approval from the Antitrust Division of the United States Department of Justice (DOJ) for the proposed acquisition of Monsanto."
"Receipt of the DOJ's approval brings us close to our goal of creating a leading company in agriculture," said Bayer CEO Werner Baumann. "We want to help farmers across the world grow more nutritious food in a more sustainable way."
Bayer has now obtained almost all clearances which are conditions for closing the transaction. The company expects to receive any outstanding approvals required for completing the transaction very shortly.
Bayer noted that it will become the sole shareholder of Monsanto Company following the receipt of outstanding approvals. According to the DOJ's conditional approval, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been accomplished. This is expected to be in approximately two months, Bayer said.
The National Farmers Union condemned approval of the deal, saying it will consolidate control of more than a quarter of the world's seed and pesticides market and create the largest seed and crop chemicals company in the world.
In a reference to the recent Dow-DuPont merger and ChemChina's acquisition of Syngenta, National Farmers Union President Roger Johnson said, "Bayer's acquisition of Monsanto culminates the latest and most disturbing round of consolidation amongst the handful of companies that control both U.S. and global agricultural markets."
"Three massive companies now control the markets that supply agricultural inputs like seeds, traits and chemicals. This extreme consolidation drives up costs for farmers and it limits their choice of products in the marketplace. It also reduces the incentive for the remaining agricultural input giants to compete and innovate through research and development.
"While we appreciate the significant divestitures agreed to as part of this approval, Farmers Union condemns DOJ's continued rubber-stamping of mergers in the food and agriculture arena.
"We will now focus our efforts on ensuring the promises made by Bayer and Monsanto throughout this approval process are kept. The company must continue to increase the productivity of American family farmers by delivering localized solutions in seed, trait, and crop chemical innovation."
–The Hagstrom Report