By Jeffrey May, J.D.
The Department of Justice Antitrust Division has approved Bayer AG’s proposed acquisition of Monsanto Company, subject to the divestiture of businesses and assets collectively worth approximately $9 billion. The deal is valued at $66 billion and was announced nearly two years ago. The Justice Department filed a complaint and proposed consent decree in the federal district court in Washington, D.C. If approved by the court, the consent decree requiring the divestitures would resolve the Justice Department’s competitive concerns (U.S. v. Bayer AG, Case No. 1:18-cv-01241).
The government alleged that Bayer and Monsanto compete across a broad range of agricultural products, including genetically modified (GM) seeds and traits for row crops (including cotton, canola, and soybean); crop protection products, such as foundational herbicides and seed treatments; and vegetable seeds (carrots, cucumbers, onions, tomatoes, and watermelons). The Justice Department pointed to 17 specific relevant product markets in which competition would be injured without the divestitures. The geographic markets varied from national to regional based on the type of product.
Bayer, based in Germany, has three main product lines, including its agricultural business. The complaint identifies Bayer’s crop protection business as the second largest in the world. Its seeds and traits business is also among the world’s largest. According to the complaint, U.S.-based Monsanto is the leading global producer of seeds and traits and is among the world’s largest producers of crop protection products.
Divestitures. In announcing the settlement, the Justice Department said that it had secured the largest merger divestiture ever. It also noted that the structural solution remedied both horizontal and vertical competition concerns.
Under the terms of the proposed consent decree, Bayer must divest those Bayer businesses that compete with Monsanto currently. These include Bayer’s cotton, canola, soybean, and vegetable seed businesses, as well as Bayer’s Liberty herbicide business, a key competitor of Monsanto’s well-known Roundup herbicide, according to the Justice Department. The settlement also requires the divestiture of certain intellectual property and research capabilities, including "pipeline" R&D projects.
Bayer has agreed to divest the divestiture assets to BASF SE, which has its own multi-billion-dollar crop protection business. The divestitures are intended to enable BASF to replace Bayer as an independent and vigorous competitor in each of the markets in which the proposed merger would otherwise lessen competition, the Justice Department said.
Bayer statement. Bayer said in a statement released today that it expects to receive any outstanding approvals for the deal very shortly. "The integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been accomplished," according to the statement. "This is expected to be in approximately two months."
EC clearance. The Justice Department approval follows conditional clearance of the deal from the European Commission (EC). In order to obtain EC approval, Bayer committed to divest an extensive remedy package worth well over €6 billion. Bayer agreed to sell parts of its Crop Science business to BASF for up to €1.7 billion.
Other agricultural industry deals. It was nearly a year ago that the Justice Department conditionally approved the combination of two other agricultural giants—The Dow Chemical Company (Dow) and E.I. DuPont de Nemours & Co. Under the terms of a consent decree approved in October 2017, DuPont was required to divest its market-leading Finesse herbicide and Rynaxypyr insecticide products to a buyer to be approved by the United States. In April 2017, the FTC announced another significant approval of a combination of agriculture industry companies. China National Chemical Corporation agreed to divest certain pesticide-based crop protection business operations in the United States in order to address FTC’s charges that its proposed merger with Swiss global agricultural company Syngenta AG would have an anticompetitive impact on the domestic market.
American Antitrust Institute response. The American Antitrust Institute (AAI) issued a statement today, saying that the "remedy raises significant issues of execution risk." According to AAI, the remedy attempts to create out of "whole cloth" a rival in BASF that will be required to fully restore competition lost by the merger. "The remedy is a tall order. AAI will be watching carefully to see if it succeeds," said AAI President Diana Moss.
Attorneys: Scott I. Fitzgerald for Department of Justice Antitrust Division. Steven L. Holley (Sullivan & Cromwell LLP) for Bayer AG. Johnathan I. Gleklen (Arnold & Porter Kaye Scholer LLP) for Monsanto Co. Jeffrey H. Perry (Weil, Gotshal & Manges LLP) for BASF SE.
Companies: Bayer AG; Monsanto Co.; BASF SE
MainStory: TopStory Antitrust AcquisitionsMergers AntitrustDivisionNews
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