Bayer-Monsanto deal: US gov orders largest-ever merger divestiture

The US government has required German company Bayer to divest $9 billion worth of business and assets in order to continue with its proposed $66 billion acquisition of US-based Monsanto.

According to the US Department of Justice (DoJ), the proposed divestiture to chemical company BASF, which has a crop protection business, will calm competition fears. As a result, American farmers and consumers will continue to benefit from competition.

The proposed merger divestiture represents the largest ever required by the US.

Life sciences company Bayer and Monsanto are two of the largest agricultural companies in the world.

“This comprehensive structural solution to significant horizontal and vertical competition concerns … preserves competition in the sale of these critical agricultural products and protects American farmers and consumers,” said assistant attorney general of the DoJ’s antitrust division Makan Delrahim.

Yesterday, May 29, the division filed a civil antitrust lawsuit in the US District Court for the District of Columbia in an effort to block Bayer’s proposed transaction to acquire Monsanto. At the same time, the division filed a proposed settlement that would resolve the department’s competition concerns.

Both companies have developed technologies that have allowed farmers to increase crop yields and improve efficiency. According to the DoJ, the proposed merger could result in higher prices, lower quality seed and crop protection products, and fewer choices for products if the divestiture is not agreed to.

Under the proposed settlement, Bayer has been told to divest its businesses that currently compete with Monsanto.

Bayer must also perform “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”.

The proposed settlement requires the divestiture of certain IP and research capabilities. It also requires the “divestiture of additional complementary assets that are needed to ensure that BASF has the same innovation incentives” that Bayer would have as an independent competitor.

The proposed settlement will be published in the Federal Register. Written comments concerning the proposal can be submitted within 60 days of its publication, after which the district court may enter a final judgment.

In March this year, the European Commission approved the acquisition, but as part of the Commission’s conditions of approval, Bayer will divest its entire vegetable seed business and research and development organisation to avoid overlap of the parties’ seeds, pesticides and digital agriculture divisions.

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