Bayer AG (ADR) (OTCMKTS:BAYRY) To Divest Assets Worth $9 Billion As A Result Of Antitrust Issues In The U.S

The plan to sell the assets worth $9 billion was announced on Tuesday by the Department of Justice, revealing that the assets would be sold to a chemical manufacturer called BASF. The sale will involve the German company’s agricultural businesses and other assets and Bayer reportedly agreed to go along with the sale so that it can pave the way for a regulatory approval of the planned acquisition of Monsanto Company (NYSE:MON).

The assets to be divested include Bayer’s vegetable seed, soybean, and canola businesses. The German firm will also sell its Liberty herbicide business and the interesting thing is that all the above businesses are rivals to products made by Monsanto. This means Bayer will still operate similar products to the ones that it is required to sell. Bayer pointed out in a statement that the sale would be advantageous to its competitors because it means less competition since Monsanto will now be part of Bayer.

Bayer will also sell off some of its research efforts including R&D projects that are currently in the pipeline. The firm will also let go of some of its intellectual property and other structural divestitures as revealed by the Department of Justice. The latter stated that the acquisition of Monsanto would be considered illegal or unlawful if the German company does not sell some of its assets. This is because Bayer would become too big and yield too much control over the market, thus resulting in unfair competition.

Bayer plans to acquire Monsanto for $66 billion, putting it right up there with some of the biggest mergers in history. The Justice Department has given the German company the green light for the acquisition although the approval came after Bayer agreed to sell some of its assets, meaning it is a conditional approval. If Bayer fails to divest the assets, then the Monsanto merger might not materialize. Fortunately, the German company has already secured a deal with BASF which has agreed to buy the divested assets according to the Justice Department.

The competition in the U.S market is important especially for farmers especially in terms of product pricing. This is one of the reasons that the Justice Department has been adamant about the need for Bayer to divest some of its assets

The Department of Justice stated that if Bayer opted not to divest some of its assets, then the Monsanto deal would result in fewer and lower quality choices as well as higher prices for crop protection and seed products.

Bayer’s CEO, Werner Baumann stated that the approval from the Department of Justice brings the company closer to its objective of becoming the market leader in the Agriculture sector. He also added that the company is determined to help farmers grow more sustainable foods in a manner that is sustainable.