BASF Acquires Majority of Bayer Seed and Herbicide Business in $7B Deal

As part of its planned acquisition of Monsanto, Bayer has agreed to divest significant portions of its seed and non-selective herbicide business to BASF in a US$7B all-cash deal.

This deal marks the entrance of Germany’s BASF, the third largest player in the crop chemical industry, into the global seeds space - a sector that the group had previously avoided in favor of the development of beneficial plant traits that it would then license to outside seed developers.

However, the need by Bayer to satisfy regulatory concerns surrounding its $66 billion deal to acquire Monsanto has created a landscape where rivals have the rare opportunity to buy highly attractive assets that will give them wider exposure in the row crop value chain.

“With this investment, we are seizing the opportunity to acquire highly attractive assets in key row crops and markets. It will be a strategic complement to BASF’s well-established and successful crop protection business as well as to our own activities in biotechnology,” said Dr. Kurt Bock, Chairman of the Board of Executive Directors of BASF SE, in a company release. “The acquisition will further enhance our agricultural solutions offer, which is a core pillar of BASF’s portfolio.”

The specific assets being sold by Bayer include:

• The company’s global glufosinate-ammonium business and the related LibertyLink™ technology for herbicide tolerance.

• The entirety of the company’s field crop seeds businesses including its global cotton seed business (excluding India and South Africa); its North American and European canola seed businesses and its soybean seed business; and all respective research and development capabilities.

• Manufacturing sites in Germany, the U.S., and Canada, and breeding facilities in the Americas and Europe.

• The transfer of all relevant IP and facilities, and more than 1,800 R&D, breeding, and production employees across the U.S., Germany, Brazil, Canada, and Belgium.

Under the terms of the deal, BASF has agreed to maintain all permanent positions under similar conditions for a period of three years post-closing.

“We look forward to welcoming our new colleagues to BASF. As highly experienced, dedicated and motivated professionals they will enrich our team with their expert knowledge in crop protection, seeds and traits. Together, we will shape the long-term success of BASF, serving the needs of farmers around the globe,” said Markus Heldt, president of BASF’s Crop Protection division.

“I am very pleased that, in BASF, Bayer has selected an acquirer that, like our company, attaches a great deal of importance to social partnership and values its employees. I welcome the fact that BASF has committed to offering comparable employment conditions for our colleagues,” said Oliver Zühlke, Chairman of the Bayer Central Works Council, in a company release announcing the deal.

The deal is conditional upon Bayer’s acquisition of Monsanto being completed.

After months of negotiations and three bid increases, Bayer was successful in reaching an agreement with Monsanto for a $66 billion takeover of the company in September 2016. However, EU competition regulators announced in August of this year that concerns over limited competition has led it to undertake an in-depth investigation into the deal that would create the world’s largest seed and pesticide company.

“The Commission has preliminary concerns that the proposed acquisition could reduce competition in a number of different markets resulting in higher prices, lower quality, less choice and less innovation,” it said in a statement at the time.

The Commission also stated that the divestments that Bayer had offered to make at the time were not enough - something that this deal with BASF should go a long way toward satisfying.

If successful, a deal between Bayer and Monsanto also would have a significant effect on Bayer’s structure, making about half of the group’s sales originate from agriculture instead of health care – a fact that has caused consternation with some of the group’s investors who have traditionally viewed the company as a pharmaceutical entity.

“We knew that Bayer would have to bid higher and this offer is probably getting closer to succeeding, but it doesn’t change our view that it presents significant risks to shareholders,” Greg Herbert, co-manager of the Jupiter Global Equity Income Fund, told Reuters when the deal became public in September 2016.

“The company will be left with a highly geared balance sheet and the management effort to integrate the two businesses could easily lead to the larger pharmaceutical business being neglected.”

Despite the challenges that the two companies still face, key players see the deal as bringing together two different but complementary businesses that will create a wide platform of solutions and benefits for the world’s farmers.