Bayer sells units to be able to complete Monsanto takeover

BASF the world's biggest chemicals company based in eastern Germany makes a bid to enter the genetically-modified seeds market. Patrick Pleul  AFP

BASF is acquiring major parts of Bayer's seed and non-selective herbicide businesses in an all-cash deal worth €5.9bn, the German chemical majors said on Friday.

For BASF, which is headquartered in the southern German city of Ludwigshafen, the deal, which is their biggest ever acquisition, marks a long-awaited entrance into the genetically-modified seeds market.

BASF said the businesses to be purchased from Bayer generated sales of €1.3bn in 2016, with earnings before interest, tax, depreciation and amortisation (EBITDA) of around €385m.

As part of the asset sale to BASF, which is conditional upon the Monsanto acquisition going through, more than 1,800 staff, primarily in the United States, Germany, Brazil, Canada and Belgium, will transfer to BASF.

"BASF's decision to acquire seeds assets represents something of a change to its prior view on its needs to respond to recent industry consolidation in agriculture", Morgan Stanley analysts said.

Bayer has to sell the LibertyLink-branded seeds and Liberty herbicide businesses because they compete with Monsanto's Roundup weed killer and Roundup Ready seeds.

Bayer says the assets to be sold include its global glufosinate-ammonium business and related LibertyLink technology for herbicide tolerance, almost all its field-crop seeds businesses, as well as respective R&D capabilities.

"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", he said.

From Bayer's perspective, the deal sees them edge closer towards gaining regulatory approval for their massive and somewhat controversial takeover of Monsanto.

Environmentalists and politicians on both sides of the Atlantic fear that the deal, which would create a global seeds and pesticides behemoth with annual revenues of around 23 billion euros and 140,000 employees, would give the combined firm too much power over the food chain.

It said it would use the proceeds of the sale to partially refinance the planned acquisition of Monsanto, which it still hopes will close in early 2018.

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