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BASF to acquire Bayer's glufosinate and seed assets

Bayer has agreed a deal for BASF to acquire its Crop Science division’s glufosinate-ammonium herbicide and selected seed businesses including genetically modified LibertyLink products for a combined €5.9 billion ($7 billion at the current rate).

Bayer has agreed a deal for BASF to acquire its Crop Science division’s glufosinate-ammonium herbicide and selected seed businesses including genetically modified LibertyLink products for a combined €5.9 billion ($7 billion at the current rate). The sale is subject to the closing of Bayer’s planned acquisition of Monsanto as well as regulatory clearance.

The assets to be sold generated net sales of some €1.3 billion ($1.5 billion) and earnings before interest, tax, depreciation and amortisation of €385 million ($457 million) in 2016, BASF notes. Bayer has committed to achieving sales of assets with combined turnovers of up to €1.6 billion ($1.9 billion).

The deal would result in BASF’s entry into the seeds market. Chairman of the board Dr Kurt Bock welcomes the planned purchase. “We look forward to growing these innovative and profitable businesses and to welcoming the experienced and dedicated team in crop protection, seeds and traits. These businesses are an excellent match for BASF group’s portfolio,” he says. The company revealed last year that it was pursuing potential acquisitions including opportunities arising from ongoing merger and acquisition efforts in the industry, but has insisted until this deal that it would remain focused on its agrochemical business and not consider an entry into seeds. BASF provides its Clearfield herbicide technology to seed companies in the development of non GM herbicide-tolerant products.

Divesting businesses

As well as the global glufosinate-ammonium and herbicide tolerance LibertyLink technology, the deal includes the sale of “essentially all” of Bayer’s field crop seeds businesses, as well as respective R&D capabilities. The businesses being divested include the global cotton seed business (excluding India and South Africa), the “mainly” European oilseed rape seed businesses, canola hybrids in North America under the InVigor brand using the LibertyLink technology, and the soybean seed business.

The transaction would include the transfer of intellectual property and facilities, as well as more than 1,800 employees primarily in the US, Germany, Brazil, Canada and Belgium. BASF would acquire the sites for glufosinate-ammonium manufacturing and formulation in Germany, the US and Canada, seed breeding facilities in the Americas and Europe as well as trait research facilities in the US and Europe. It is guaranteeing the continued employment of all transferring staff for “at least” three years.

Chairman of Bayer’s board of management Werner Baumann notes the deal’s link to the planned acquisition of Monsanto. “We are taking an active approach to address potential regulatory concerns, with the goal of facilitating a successful close of the Monsanto transaction,” he says.

The EU and Brazil are among those yet to have cleared Bayer’s planned acquisition of Monsanto. The provisional deadline for a decision in the EU’s in-depth inquiry on the proposed deal was recently extended by ten days to January 22nd 2018. The Brazilian authority, the Cade, has also called for an in-depth impact study on the deal. US, Canadian and Brazilian authorities are reportedly working closely with the EU and to similar time frames.

The EU has highlighted competition concerns over: glyphosate and glufosinate-ammonium herbicides in the two company’s respective portfolios, noting glyphosate as the largest-selling non-selective herbicide in Europe, and glufosinate-ammonium as one of its “very few” alternatives; in herbicide tolerance traits; and the two companies’ “high combined market shares” in several seed markets including field crops. Earlier this year, the South African competition authority cleared the acquisition on condition that Bayer divest its entire global LibertyLink technology and its associated glufosinate-ammonium-based Liberty herbicides.

Bayer has submitted applications to some 30 authorities and by last month had gained clearance from more than a third of them. The companies expect the deal to be completed in early January 2018.

The company notes that the deal’s €5.9 billion price excludes the value of any net working capital and will be subject to customary adjustments at closing, including the value of any inventories transferred to BASF. Bayer will use net proceeds from the divestiture to partially refinance the planned acquisition of Monsanto. It will also provide an update on the expected synergies from the Monsanto acquisition upon closing of the transaction.

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