Justice Department approves Bayer’s acquisition of Monsanto

Pending divestiture of businesses and assets collectively worth about $9 billion, the U.S. Department of Justice announced May 29 it is allowing Bayer AG to proceed with its proposed $66 billion acquisition of Monsanto Co.

According to a DOJ statement, Bayer will hand off certain properties to BASF. The deal, the statement said, “will fully resolve all horizontal and vertical competition concerns. As a result, American farmers and consumers will continue to benefit from competition in this industry.”

Assistant Attorney General Makan Delrahim of the DOJ antitrust division said in a statement, “This comprehensive structural solution to significant horizontal and vertical competition concerns—the largest merger divestiture ever required by the United States—preserves competition in the sale of these critical agricultural products and protects American farmers and consumers.

“We commend the parties for working with the Antitrust Division to resolve our concerns on behalf of American consumers.” 

The department’s antitrust division has filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed transaction while simultaneously filing a proposed settlement that, if approved by the court, would resolve the department’s competitive concerns.

Bayer, based in Leverkusen, Germany, and Monsanto, headquartered in St. Louis, Missouri, are two of the largest agricultural companies in the world. They compete to provide farmers with a broad range of seed and crop protection products. Bayer and Monsanto also have been leaders in developing technologies that have allowed farmers to significantly increase crop yields and improve efficiency.

“Without the agreed-to divestitures, the proposed merger would likely result in higher prices, lower quality, and fewer choices across a wide array of seed and crop protection products. The merger also threatened to stifle the innovation in agricultural technologies that has delivered significant benefits to American farmers and consumers,” the DOJ statement said.

Under the terms of the proposed settlement, Bayer must divest those Bayer businesses that compete with Monsanto. 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.

The settlement also requires structural divestitures to remedy the competitive harm that would result from the vertical integration of certain significant Bayer seed treatment businesses with Monsanto’s leading seed businesses. Additionally, because Bayer and Monsanto currently compete to develop new products and services, the settlement requires the divestiture of certain intellectual property and research capabilities, including “pipeline” R&D projects.

Finally, in order to fully prevent competitive harm from the merger, the settlement requires the divestiture of additional complementary assets that are needed to ensure that BASF has the same innovation incentives, capabilities and scale that Bayer would have as an independent competitor including, most notably, Bayer’s nascent “digital agriculture” business.

The settlement also includes, consistent with other settlements in this administration, several provisions designed to improve the effectiveness of the decree and the division’s future ability to enforce it.

The department expressed thanks to its enforcement partners around the world, especially its counterparts at the European Commission, the Canadian Competition Bureau, and the Administrative Council for Economic Defense of Brazil, for their close and constructive collaboration on this matter.

As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Kathleen S. O’Neill, Chief, Transportation, Energy and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

Bayer’s CEO supported the decision.

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

Bayer has now obtained almost all clearances, which are conditions for closing the transaction. The company expects to receive any outstanding approvals required for completing the transaction very shortly.

Bayer will become the sole shareholder of Monsanto Co. following the receipt of outstanding approvals. According to the DOJ’s conditional approval, the integration of Monsanto into Bayer can take place as soon as the divestments to BASF have been accomplished. This is expected to be in approximately two months.

National Farmers Union President Roger Johnson issued the following statement in response to the announcement:

“Bayer’s acquisition of Monsanto culminates the latest and most disturbing round of consolidation amongst the handful of companies that control both U.S. and global agricultural markets. Three massive companies now control the markets that supply agricultural inputs like seeds, traits and chemicals. This extreme consolidation drives up costs for farmers and it limits their choice of products in the marketplace. It also reduces the incentive for the remaining agricultural input giants to compete and innovate through research and development.

“While we appreciate the significant divestitures agreed to as part of this approval, Farmers Union condemns DOJ’s continued rubber-stamping of mergers in the food and agriculture arena. We will now focus our efforts on ensuring the promises made by Bayer and Monsanto throughout this approval process are kept. The company must continue to increase the productivity of American family farmers by delivering localized solutions in seed, trait, and crop chemical innovation.”

The Organization for Competitive Markets said the DOJ statement, “makes it clear that our anti-monopoly laws are completely worthless and the U.S. Department of Justice merger review process is pointless.

“Economists have well established there is a strong likelihood of market abuse when four companies control 45 percent of the market, and the fact that DOJ has now allowed one company to control 77 percent of all seed corn, 69 percent of all seed traits and 58-97 percent of the markets in cotton, soybeans, and canola, means DOJ has just authorized a monopoly. America’s family farmers will pay the price for this action and consumers will see fewer choices in the market. Where is the justice in the Department of Justice?” 

Larry Dreiling can be reached at 785-628-1117 or [email protected].