Bayer receives US antitrust approval for US$66bn Monsanto bid

USA – Bayer’s US$66 billion takeover bid for the US based agrochemical and biotechnology corporation, Monsanto, has cleared the last major regulation hurdle by receiving US antitrust approval to form one of the largest agri-chemical conglomerates in the world.

CNBC reported that the approval by the Justice Department was granted on condition that Bayer agreed to sell agricultural businesses and assets worth about US$9 billion to chemical giant BASF, in one of the largest divestiture in American antitrust enforcement history.

Decision by the US Justice Department clears doubts by the government that the merger would harm farmers and customers if it was approved as initially structured.

Once the takeover proposal was announced, farmers and consumers criticised the merger which is likely going to see three global multinationals dominate the world’s agriculture industry, casting possibility of high prices and less choice for farmers.

Criticism also arose from the National Farmers Union, the second biggest farmer group in the US faulting the Justice Department of clearing such kind of mergers that could heighten costs for farmers and limit their choice of products on the market.

Throughout the approval, Bayer and Monsanto have pledged to deal with arising issues as according to analysts, the deal may reduce competition.

This was reiterated by the US’s attorney-general Xavier Becerra, who said the deal ‘could further suffocate competition’ for sales of seeds and chemicals to farmers who are already struggling with low crop prices.

“America’s farm system is of critical importance to our economy, to our food system, and to our way of life,” Makan Delrahim, the head of the department’s antitrust division.

“American farmers and consumers rely on head-to-head competition between Bayer and Monsanto.”

Merger approvals and significant divestitures

In order to meet anti-trust requirements, Bayer had to make significant divestitures in vegetable seeds and seeds business in addition to transfer of digital assets for the regulatory greenlight.

With the deal expected to close by June 14, the companies have strived to deliver on the regulatory conditions having received antitrust approval from most jurisdictions around the world including form the European Union and the US.

Bayer agreed to sell another bundle of assets after announcing sale of its crop-science business plus a license for its digital-farming data to rival BASF SE for US$7 billion in October 2017.

After substantial asset sales to boost rivals, the companies secured EU approval and in April received another yet vital nod from the US Justice Department.

According to a statement from the German based company Leverkusen, Bayer expects to receive approvals from Canada and Mexico in order to close the deal although the merger would only happen if BASF completes its divestitures that could be in two months’ time.

A series of mergers

The agricultural industry has witnessed a consolidation drive driven by competition to take advantage of the rising demand and innovation in seed and crop protection products.

Last year, Dow Chemical Co and DuPont successfully completed their planned US$130 billion merger to form DowDuPont.

The EU regulators also approved another mega deal, that is ChemChina US$43 billion deal to buy Switzerland’s Syngenta AG on condition that it divest three of its products.

According to Bloomberg, the Bayer-Monsanto combined businesses which boasts of US$48 billion in sales will surpass those of DowDuPont and ChemChina.

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