Bayer seeks EU blessing for $66bn Monsanto takeover

Bloomberg

Bayer AG asked the European Union to approve its $66 billion combination with Monsanto Co., the last of a trio of mega-deals reshaping the global agrochemicals industry.
The German chemical giant’s filing kickstarts an initial review with an Aug. 7 deadline. Bayer said it’s still seeking to close the deal “before the end of 2017,” a sign that it’s hoping to sidestep a lengthy second phase probe that could add a further four months to the process.
The Brussels-based commission extracted extensive concessions before clearing Dow Chemical Co.’s $77 billion merger with DuPont Co. and China National Chemical Corp.’s $43 billion takeover of Swiss pesticide maker Syngenta AG.
The deals have drawn intense scrutiny, with regulators saying they want to ensure that fewer suppliers of crop-protection products and other critical inputs for farmers won’t lead to higher prices that could push up the cost of food for consumers. The EU also looked at how merging Dow and DuPont might harm research efforts.
Bayer said it plans to cut its sales and profit forecasts for this year because of unexpectedly high stockpiling in Brazil of its crop-protection products. Full-year earnings before interest, taxes, depreciation and amortization and other special costs will be reduced by 300 million euros to 400 million euros, the Leverkusen, Germany-based company said. Second-quarter results will also be eroded. The stock dropped by the most in almost eight months.
Carles Esteva Mosso, the EU’s top merger official, said this week that it’s wrong to assume the Bayer-Monsanto deal would bring the number of global crop protection competitors down to four as it is already the case that “for 80
percent of European crops there are four or less global players able to produce products and innovate.”
He also highlighted a drop in innovation in the pesticides market over the last few decades amid waves of consolidation, saying that there are fewer active ingredients brought to the market every year. While this can be explained by several factors including stricter regulator, agrochemical companies haven’t been investing more to deal with this constraint, Mosso said at a Paris event organized by the Concurrences Review.
Bayer has already filed for approval in the US and the Justice Department could require additional asset sales to resolve competition concerns. BASF SE and Syngenta are among companies that have submitted preliminary bids for assets that Bayer plans to sell in order to get regulatory approval for its takeover, according to people familiar with the matter.
Agricultural businesses have been dogged by falling crop prices globally. Falling crop prices and a quest for greater efficiency triggered a cascade of deals in the industry.