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U.S. DOJ Approval Means Bayer’s Buyout of Monsanto Likely in Two Months

Bayer and Monsanto will be integrated as soon as BASF divestments have occurred.

The days are getting closer until Bayer and Monsanto are one. Bayer today obtained conditional approval from the Antitrust Division of the United States Department of Justice (DOJ) for its proposed acquisition of Monsanto.  

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

Bayer officials say the two firms will continue to operate independently until divestments to BASF are complete. 

There’s a hitch, though. The DOJ is requiring Bayer to divest businesses and assets collectively worth approximately $9 billion in order to proceed with its proposed $66 billion acquisition of Monsanto Company.  The proposed divestiture to BASF will fully resolve all horizontal and vertical competition concerns, according to a DOJ news release. DOJ officials say this ensures U.S. farmers and consumers will continue to benefit from competition in this industry.

Not everyone shares this view. A group called Farmers and Families First published a white paper in late 2017 critical of Bayer's acquisition of Monsanto. Concerns raised include the following:

  1. The Bayer-Monsanto merger would raise seed prices for farmers through market integration and anti-competition tactics.
  2. The merger is projected to raise aggregate seed prices by 5.5% but could raise cottonseed prices by more than 20%.
  3. Monsanto’s decade-long collaboration with BASF raises serious questions about Bayer’s divestiture of its seed and herbicide assets, and whether divestiture would actually enhance Monsanto’s control of global markets.
  4. On average, farmers using Monsanto brand cottonseed will see their seed prices increase by 19.23%, while farmers using Bayer brand cottonseed will see their seed prices increase by 17.41%

Long Road

Bayer’s move to buy Monsanto has followed a curving path since the deal was first announced in September 2016. Monsanto’s seeds and traits business is what initially attracted Bayer to Monsanto, said Liam Condon, CEO of Bayer CropScience last September. 

He says both companies are complementary with each other; Monsanto is strong in seeds and traits, and Bayer is strong in crop protection. “We see a tremendous opportunity to do things in parallel,” he says.  

That wasn’t the only reason, though. Bayer badly wanted Monsanto’s digital ag division, The Climate Corporation. Digital agriculture’s rise in farming is akin to Uber’s acceleration in transportation, says Mark Gulley, principal of New York City-based chemicals consultancy Gulley & Associates LLC. Businesses that don’t see these trends coming – such as taxi services in the case of Uber – quickly get rolled.

“They will look up and say, ‘What happened?’ Well, it happened fast,” says Gulley. “When you have ag biotech, autosteer, and now digital ag, those are big things that have long-term importance.”

Roadblocks did surface. The deal initially paired two herbicide control systems: Monsanto’s Roundup Ready System and Bayer’s LibertyLink system. BASF divested the Liberty Link system to BASF last October.  Assets also acquired at the time included:

  • Bayer’s global glufosinate-ammonium nonselective herbicide business, commercialized under the Liberty, Basta, and Finale brands.
  • Seed businesses for key row crops in select markets.
  • Canola hybrids in North America under the InVigor brand using the LibertyLink trait technology.
  • Oilseed rape mainly in European markets.
  • Cotton in the Americas and Europe.
  • Soybeans in the Americas.

To further appease regulators, Bayer had to divest to BASF: 

  • Global vegetable seeds.
  • Certain seed treatment products.
  • The research platform for wheat hybrids and certain glyphosate-based herbicides in Europe that are predominantly used in industrial applications.
  • Three research projects in the field of total herbicides and Bayer’s digital farming business will also be transferred. In return, Bayer will receive a back license for certain digital farming applications.
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