Monsanto-Bayer Hurdle Merger Challenge With $9B Divestment

WASHINGTON (CN) – Paving the way for its acquisition by Monsanto for $66 billion, the drugmaker Bayer agreed Tuesday to divest $9 billion in assets. The figure is largest merger divestiture ever required by the Department of Justice.

Under the proposed settlement, Bayer agreed to let the German chemical company BASF buy parts of its business that compete directly with Monsanto.

Citing a years-long investigation, the Justice Department brought its challenge to the merger this morning with a federal complaint in Washington. Without the required divestiture, the merger “would result in higher prices, less innovation, fewer choices, and lower-quality products for farmer and consumers throughout the United States and around the world,” the complaint states.

Antitrust authorities also say the merger could also eliminate competition for development of genetically modified seeds among the three largest cash crops in the United States – soybeans, canola and cotton – along with their respective herbicides.

Competition between Bayer and Monsanto to develop higher-quality tomato, carrot, cucumber, onion and watermelon seeds would allegedly suffer as well.

Under the settlement agreement, Bayer agreed to sell its vegetable, canola, cotton and soybean seed businesses, along with its Liberty herbicide business, which competes directly with Monsanto’s weed killer Roundup.

The Justice Department filed the proposed settlement simultaneously with the civil lawsuit. The final transaction is contingent upon the court’s approval. Other documents include a stipulation, consent decree and competitive impact statement.

In a statement, Bayer CEO Werner Baumann said the German-based company expects that the transaction will be complete in roughly two months, once the divestments to BASF are complete.

“Receipt of the DOJ’s approval brings us close to our goal of creating a leading company in agriculture,” Baumann said in a statement. “We want to help farmers across the world grow more nutritious food in a more sustainable way.”

According to the Justice Department, Bayer agreed to structural divestitures, along with “certain intellectual property and research capabilities, including ‘pipeline’ R&D projects.”

Bayer also agreed to divest other complimentary assets that will ensure BASF has capabilities and innovation incentives akin to what Bayer had as an independent competitor. That reportedly includes Bayer’s budding “digital agriculture business.”

U.S. approval of the merger is one of the final obstacles to complete the transaction, following approval from regulators in Russia, Brazil and the European Union.

Assistant Attorney General Makan Delrahim with the Justice Department’s Antitrust Division lauded the parties for working to resolve the department’s concerns about the merger.

“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,” Delrahim said in a statement.

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