Justice Dept approves Bayer-Monsanto merger in landmark settlement

WASHINGTON: Federal antitrust regulators have granted agribusiness giants Bayer and Monsanto permission to merge after the two companies agreed to spin off $ 9 billion worth of assets, the largest such sale of corporate assets ever required by the Justice Department.

Under the proposed settlement filed last Tuesday, Bayer will sell its seed and herbicide businesses to a third party, the German chemical company BASF. It also will sell its emerging digital farming business as well as a variety of intellectual property and R& D projects.

The targeted spinoffs are aimed at preventing Bayer and Monsanto from using their combined control over seeds and seed treatments to raise the price of agricultural products to farmers and consumers, Justice Department officials said. Just six companies, including Bayer and Monsanto, have historically dominated the global trade in seeds and agrochemicals.

The $ 66 billion deal already has received approval from regulators in the European Union, Russia and Brazil, making the US approval one of the last major hurdles. Bayer said it expects to complete the merger by midsummer.

“Receipt of the DOJ’s approval brings us close to our goal of creating a leading company in agriculture,” Bayer chief executive Werner Baumann said in a statement. US antitrust officials investigated the BayerMonsanto deal for more than a year, ultimately concluding that it could result in increased costs for the country’s agricultural sector. Both companies produce genetically modified cotton, canola and soybean seeds, as well as the pesticides that pair with them. Under the original deal, Bayer would have acquired a monopoly over herbicide-resistant cotton and canola in the United States and a near monopoly in some other crops, including cucumbers and carrots, the Justice Department found.

“America’s farm system is of critical importance to our economy, our food system and our way of life,” Makan Delrahim, the Justice Department’s top antitrust enforcer, told reporters. “America’s farmers rely on headto-head competition between Bayer and Monsanto.”

In addition to eliminating a direct competitor in some lines of business, the deal as proposed would have led to Bayer gaining anticompetitive leverage in other markets, according to the Justice Department.

By merging with Monsanto, regulators found, Bayer would become a major supplier of corn seed. After the merger, Bayer, which also sells a key seed treatment to corn farmers, would have an incentive to raise the price of the treatment knowing that farmers would have fewer choices of seed suppliers, the government alleged.

Regulators also ruled that Bayer and Monsanto would lose motivation to develop new crops, treatments and pesticides as a result of the merger. To address those concerns, the Justice Department will require Bayer to transfer several research facilities and projects to BASF, including a research center in North Carolina and a bank of soybean tissue samples used to develop new products.

“The proposed remedies will ensure that BASF can step into Bayer’s shoes, thereby preserving the competition that the merger would otherwise destroy,” the government said.

Concerns about competition have grown thanks to a wave of megamergers in the agricultural industry. Regulators last year signed off on mergers between DuPont and Dow Chemical, as well as ChemChina and Syngenta, concentrating global agrochemical research and sales in the hands of five companies.

The Monsanto-Bayer merger will further shrink that number to four, raising questions about the future of agricultural competition and innovation. Some critics of the deal said they were not satisfied by the terms disclosed last week.

“Today’s news makes it clear that our antimonopoly laws are completely worthless and the US Department of Justice merger review process is pointless,” said the Organization for Competitive Markets, a farm group that opposes megamergers, in a statement.

Angela Huffman, a spokeswoman for the group, added that while it could not yet predict the full impact on farmers, OCM expects the deal to raise seed and pesticide costs. That probably will have little impact on consumers, given that farm expenses account for only a small portion of food prices.

Bayer has defended the deal as the surest way to increase agricultural productivity as the world’s population grows, citing Monsanto’s advantage in plant genetics and Bayer’s portfolio of pesticides and other chemicals.

“Farmers will benefit from a range of new, superior solutions aimed at helping to advance the next generation of farming and to address some of society’s most pressing challenges,” the company says on a website advocating for the settlement. — WP-Bloomberg