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Bayer AG and Monsanto win approval from EU competition regulators for their tie-up

Last updated: 10:19 21 Mar 2018 EDT, First published: 06:19 21 Mar 2018 EDT

a field of crops under a blue sky
German rival BASF is the proposed buyer of Bayer and Monsanto's required divestments

Bayer AG (ETR:BAYN) won a victory Wednesday as the European Commission approved its proposed US$63bln acquisition of Monsanto Co. (NYSE:MON)  following its US$7bln divestment of its global field crop seeds and its pesticides businesses as well as the licensing of some of its digital agriculture technology to its German rival, BASF SE.

The merger, which has yet to be approved in full by US regulators, has received the green light from European regulators, according to EU commissioner Margrethe Vestager, as any concerns about the crimping of competition have been addressed. If full approval is received, the combined company will be the largest seed and pesticide provider in the world.  

In a statement, commissioner Vestager, who is in charge of competition policy, said: “We have approved Bayer’s plans to take over Monsanto because the parties’ remedies, worth well over €6bln, meet our competition concerns in full. Our decision ensures that there will be effective competition and innovation in seeds, pesticides and digital agriculture markets also after this merger.”

The marriage of Bayer and Monsanto marks the third tie-up in the sector recently and comes alongside the combinations of Dow and Dupont and ChemChina and Syngenta, which also were forced to sell off assets to satisfy the concerns of regulators.

The Bayer and Monsanto tie-up has received scathing criticism from farmers and environmentalists, who have concerns about the group’s dominance in a difficult global farming market.  Monsanto is the world's largest supplier of seeds, which generates most of its sales in the US and Latin America and also sells glyphosate, which is the most-used pesticide to control weeds. Bayer, meanwhile, is the world's second-largest supplier of pesticides, with a stronger focus in Europe.

The asset sales and additional divestments required include Bayer’s global research and development organization for seeds and their traits as well as its efforts to develop a rival to Monsanto’s pesticide glyphosate. To satisfy EU regulatory requirements, Bayer has also committed to granting a license to its full global digital agriculture product portfolio, according to EU regulators.

EU regulators are still reviewing BASF’s worthiness as the proposed purchaser for the deal’s remedy package. Bayer and Monsanto can only implement the transaction when the Commission has completed its review of BASF.

In midday trade, Monsanto shares were flat at US$119.15 as were Bayer shares, which hovered at US$94.16.

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