Bayer, Monsanto's $57 Billion Megadeal Faces Closer EU Scrutiny -- 2nd Update
August 22 2017 - 6:24PM
Dow Jones News
By Natalia Drozdiak and Jacob Bunge
Bayer AG's takeover of Monsanto Co. faces deeper scrutiny from
European antitrust regulators who say they have "serious doubts"
about uniting two of the world's largest manufacturers of
genetically engineered crop seeds and pesticides.
The European Commission said the $57 billion deal could add
pressure on farmers already struggling against low crop prices. It
has completed a preliminary probe but said Tuesday that it may need
until January to finish its work, throwing into doubt the
companies' plans to complete their deal by year-end.
It is common for regulators to take longer than initially
expected to conduct their analyses. The planned tie-up between
Bayer and Monsanto, the largest in a string of deals that are
reshaping the global agricultural industry, was struck last
September as several other rival seed and pesticide makers had made
their own deals to combine.
EU antitrust chief Margrethe Vestager said: "We need to ensure
effective competition."
European Commission officials have said the Bayer-Monsanto deal
raised concerns that farmers could wind up paying more for a
narrower range of seeds and sprays, and see a slower pace of
innovation in the labs where crop scientists tweak plant genes to
enable them to survive herbicides and repel bugs.
Bayer and Monsanto both said the companies would continue to
work with regulators with a view to obtaining approvals for the
transaction by the end of the year.
A separate review by U.S. regulators is ongoing, and Bayer
earlier this year said it had received requests for information
from the U.S. Department of Justice.
Bayer and Monsanto have pitched their deal as a way to more
tightly integrate research into new chemicals and seed genes, which
in turn would help deliver better-performing supplies to farmers at
a faster pace while reducing the companies' costs.
But some farm groups and lawmakers in the U.S. have warned that
the succession of mergers will diminish competition and lead to
higher prices on the farm, and potentially for consumers.
Groups pushing back against agriculture industry consolidation
have called on regulators to block the Bayer-Monsanto deal. This
month a group of 24 agriculture organizations warned that the deal
would strengthen Bayer's hand with farmers and with smaller seed
companies.
The past year has been another lean one for farmers. Swelling
grain supplies in the U.S., Europe and South America have made
corn, soybeans and wheat cheap, forcing farmers to curb
spending.
Soybean and wheat prices have declined further over the past 12
months, and the U.S. Department of Agriculture projects that U.S.
net farm income will slide to $62.3 billion this year -- the fourth
consecutive annual decline, and half what domestic farmers earned
in 2013.
Some farmers in recent years have been able to counter cut-rate
grain prices by harvesting bumper crops. But dry weather across
some stretches of the U.S. Farm Belt this summer will make that
harder as combines roll in the autumn, analysts say.
"I don't think the average corn or soybean producer will be in
the black this year," said Michael Langemeier, professor of
agricultural economics at Purdue University in Indiana.
Lindsey Lusher Shute, executive director of the National Young
Farmers Coalition, which signed the August letter, said: "This is
not a time to narrow the options farmers have available to
them."
Bayer and Monsanto are seeking approval after the EU and other
antitrust bodies already cleared the merger of Dow Chemical Co. and
DuPont Co. as well as China National Chemical Corp.'s roughly $43
billion takeover of Swiss seed and pesticide maker Syngenta AG. The
companies made considerable divestitures to win approval in both
cases.
In spelling out its concerns about the Bayer and Monsanto deal,
the EU said the two companies have a high market share in breeding
or licensing -- and in some cases both -- vegetable, canola and
cotton seeds.
The EU also noted the two companies were the only firms among a
limited number of competitors capable of discovering new active
ingredients and new formulas, such as those that could tackle the
problem of increased weed resistance to existing herbicides.
Bayer and Monsanto already have submitted various commitments to
the EU, but regulators deemed them insufficient to dismiss their
"serious doubts" about the merger.
Bayer in May agreed to shed its glufosinate herbicide business
along with related crop genes that render plants impervious to the
chemical, as a condition for approval from South African
competition authorities. Bayer is looking to divest some cotton and
canola seed units, according to people familiar with the
discussions.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and Jacob
Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
August 22, 2017 18:09 ET (22:09 GMT)
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