Bayer Selling Seeds and Herbicide Businesses to BASF

BASF agreed to acquire the seeds and herbicides businesses of Bayer for €5.9 billion equal to $7 billion for cash, as Bayer is attempting to convince competition regulators to approve the company’s planned purchase of Monsanto.

BASF is the third largest crop chemicals maker in the world and has thus far avoided seed assets in favor of pursuing research into characteristics of plants such as their tolerance to drought, which it licenses or sells to seed developers.

However, Bayer’s deal worth $66 billion to acquire Monsanto the seeds group, which it announced in September of 2016, has created new opportunities for rivals to buy up assets that must be sold as a way to satisfy the competition regulators.

Bayer announced that it would uses its proceeds from the sale to partially refinance the acquisition of Monsanto and is planning to raise over $19 billion toward its deal through issuing new shares and convertible bonds, and lined up, up to $57 billion from banks in the form of bridge financing.

An industry analyst said that a valuation that was higher than had been expected of assets on sales could mean that Bayer would need to raise less than the $10 billion expected from the sale of new shares, making it a positive surprise.

Bayer offered to sell $2.5 billion in assets. In August, the European Commission said that Bayer’s divestments it had offered thus far did not reach a point the EC was satisfied with and began a deeper investigation into the pending deal.

Bayer must sell its LibertyLink seeds as well as Liberty herbicide, which generated sales during 2016 of €1.3 billion euros, due to them competing with Roundup Weed Killer and Ready seeds two Monsanto products.

LibertyLink seeds, which are used by cotton, canola and soy growers, are an alternative to the Roundup Ready seeds, for the farmer suffering from weeds with no developed resistance to the herbicide, known also as glyphosate.

The spread in North America of weeds resistant to Roundup has been a big driver behind sales at Liberty.

The CEO at BASF Kurt Bock said that he was looking at further opportunities for acquisitions involving seeds but said two companies are needed to complete a deal.

The group is looking at other types of assets as well, like vegetable seeds, that Bayer might need to divest, said a source close to this matter.

Bayer shares were up 1.2% on Friday during morning trading.

Leave a Reply