Bayer/Monsanto: Bayer, BASF, DOJ Staff in End Stages of Negotiating Divestiture Deal

Published on Jan 19, 2018

Bayer, BASF and DOJ staff are nearing the final stages of negotiating an agreement to ensure BASF will emerge as a strong No. 4 competitor in U.S. seeds and crop protection if the department clears the Bayer/Monsanto merger, sources familiar with the matter said.

The staff plans to recommend within weeks to DOJ’s front office whether Bayer’s proposed asset sale to BASF would address many government’s antitrust concerns with the deal, the sources said.

The talks between DOJ staff and the companies are fluid, and their success isn’t assured, the sources said. Also, staff harbors separate antitrust concerns with Bayer/Monsanto’s vegetable seed and precision agricultural businesses, the sources said.

To give the front office options, staff is preparing for a potential litigation outcome, recruiting farmers to testify in court, if necessary.

Complex divestiture. The proposed BASF divestiture is complex, and staff is pressing for the transfer of additional sales and research-and-development personnel to jump start BASF’s row-crop seed and herbicide businesses in the U.S., the sources said. BASF has pushed back on some of the transfers, arguing they are unnecessary, the sources said.

BASF also has pressed for a longer temporary accord with Bayer, known as a transition services agreement (TSA), than DOJ staff wants, the sources said. U.S. antitrust enforcers generally prefer shorter TSAs, which can create antitrust problems by forcing the acquiring firm to rely on a direct competitor.

The proposed divestiture to BASF is intended to address DOJ staff’s most significant reservations about the Bayer/Monsanto deal. Bayer agreed to sell the assets in response to staff concerns that the Monsanto acquisition would leave only three main seed and crop protection players in the U.S.: the merged company, DowDuPont and ChemChina, which last year bought Swiss agricultural conglomerate Syngenta.

The asset sales are meant to restore a strong fourth company for farmers and seed dealers, boosting BASF’s crop-protection offerings and giving the Germany-based company a U.S. seed business.

BASF said in October it would buy for 5.9 billion euros ($7.22 billion) some of Bayer’s Liberty, Basta and Finale herbicide product lines as well as canola, cotton, rapeseed and soybean seed businesses. The divestiture would include the transfer of more than 1,800 Bayer employees to BASF and the sale of seed-breeding and trait-research centers, according to the companies’ announcement.

“We remain confident in our ability to obtain necessary regulatory approvals and will continue working alongside regulators and respective agencies in support of that process,” a Bayer spokesperson said, declining to give details about the DOJ review.

A DOJ spokesperson declined to comment. A Monsanto spokesperson declined to comment and referred to comments the company’s executives made during a Jan. 4 earnings call with investors.

“We continue to remain optimistic about our collective ability to secure the required approvals for the deal in the early part of 2018,” Monsanto CEO Hugh Grant said on the call.