US forces Germany's Bayer to shed $9 billion in ag business in biggest ever antitrust sell-off

  • Bayer has agreed to sell agricultural businesses and assets worth about $9 billion to chemical company BASF.
  • The divestiture is the large antitrust-related divestiture ever, according to the Justice Department.
  • The sell-off will allow Bayer to proceed with a proposed $66 billion of Monsanto.
The CEO of German chemicals giant Bayer Werner Baumann.
Patrik Sotllarz | AFP | Getty Images
The CEO of German chemicals giant Bayer Werner Baumann.

Drug-maker Bayer, agreeing to the largest divestiture in American antitrust enforcement history, will sell agricultural businesses and assets worth about $9 billion to chemical giant BASF, clearing the way for approval of its $66 billion acquisition of Monsanto, the Justice Department announced Tuesday.

The assets include Bayer's canola, soybean and vegetable seed businesses, as well as its Liberty herbicide business, all of which currently compete with Monsanto products.

Bayer also agreed to certain "structural divestitures" and to sell off "certain intellectual property and research capabilities, including 'pipeline' R&D projects," according to the Justice Department.

In revealing the settlement it reached with Bayer, the department said the sell-off will "preserve competition threatened by Bayer's acquisition of Monsanto.

Without the divestiture, the department said, the "merger is unlawful."

Germany-based Bayer and St. Louis-based Monsanto are two of the world's biggest agricultural companies, and currently compete against one another to sell farmers seed and crop protection products, the department noted. BASF is the largest chemical producer in the world.

Bayer still is awaiting approval from the governments of Canada and Mexico for the tie-up. The company has until June 14 to close its purchase of Monsanto. After that, Monsanto has the right to withdraw from the deal or ask for a higher price.

Bayer said that it expects to receive the remaining governmental approvals for the merger "very shortly." Bayer also said that it expects to divest itself of the assets named in the settlement in about two months, after which the merger can occur.

The Justice Department said that without Bayer's sell-off of the assets, "the proposed merger would likely result in higher prices, lower quality and fewer choices across a wide away of seed and crop protection products."

Monsanto shares were trading slightly higher, up 90 cents at 127.40 per share, shortly after news of the settlement broke.

Bayer CEO Werner Baumann said, "Receipt of the DOJ's approval brings us close to our goal of creating a leading company in agriculture."

"We want to help farmers across the world grow more nutritious food in a more sustainable way," Baumann said.

A crop consultant uses a forklift to sort Monsanto DeKalb brand seed corn at the Crop Production Services warehouse in Manlius, Illinois.
Daniel Acker | Bloomberg | Getty Images
A crop consultant uses a forklift to sort Monsanto DeKalb brand seed corn at the Crop Production Services warehouse in Manlius, Illinois.

The settlement Tuesday came on the same day the Justice Department filed a civil antitrust lawsuit in U.S. District Court in Washington, DC, to block the proposed merger of Bayer and Monsanto. The suit would be resolved by a judge's approval of the settlement with the companies.

The department said that it spent more than a year conducting a comprehensive investigation of the proposed merger, and obtained "significant input" from farmers, consumer groups and others.

Assistant Attorney General Makan Delrahim of the Justice Department's antitrust division said, "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 sales of these critical agricultural products and protects American farmers and consumers."

"We commend the parties for working with the Antitrust Division to resolve our concerns on behalf of American consumers," Delrahim said.