DD DuPont de Nemours Inc

By Christopher Alessi 

FRANKFURT-- Bayer AG Chief Executive Werner Baumann Wednesday defended the company's planned $57 billion acquisition of U.S. agrochemical group Monsanto Co. amid concerns the deal could face an uphill battle with regulatory authorities over antitrust issues.

"This step is entirely logical," Mr. Baumann said of the merger with Monsanto. "The two companies are a perfect fit and complement each other ideally."

The deal with Monsanto, valued at $66 billion including debt, is the latest in a wave of consolidation in the $100 billion global crop seeds and pesticides market over the past year. Tie-ups between Syngenta AG and China National Chemical Corp. and between Dow Chemical Co. and DuPont Co. have been held up by ongoing antitrust reviews by the European Union.

Mr. Baumann said the German pharmaceuticals and chemicals giant would submit its application to EU regulatory authorities in the first quarter of 2017 and to U.S. authorities by the end of this year. He reiterated that he expected the deal to close by the end of 2017.

Mr. Baumann's remarks came as the company announced its earnings results for the third quarter of 2016. Bayer posted a 19% rise in net profit and raised its full year earnings guidance, boosted by continued uptake of its recently launched blockbuster drugs.

Net profit for the period ended Sept. 30 was EUR1.19 billion ($1.3 billion), compared with EUR999 million for the same period last year. The figure beat analysts' forecasts of a EUR1.1 billion profit, according to a recent poll by The Wall Street Journal.

Bayer said it now expects to achieve a high-single-digit percentage increase in core earnings a share for 2016, up from its previous forecast of a mid-to-high-single-digit percentage improvement. The company also reiterated its sales outlook for the full year, saying it expects sales of between EUR46 billion and EUR47 billion.

Analysts at Commerzbank called Bayer's profitability "excellent," while saying the company had delivered an overall "positive" set of third quarter figures.

Quarterly sales rose 2.3% to EUR11.26 billion, driven by sales of blockbuster drugs like blood thinner Xarelto and eye medicine Eylea.

The company's closely watched measure of earnings before interest, taxes, depreciation and amortization before special items climbed by 6%, to EUR2.68 billion, driven by strong earnings growth at its pharmaceuticals unit. Ebitda before special items for pharmaceuticals jumped 13.4% to EUR1.42 billion.

The group's recently separated specialty plastics business, Covestro AG, also posted strong earnings growth, with Ebitda before special items rising 19.5% to EUR564 million. Bayer spun off Covestro last year through a public offering but still maintains a roughly 64% stake in the company.

However, growth at Bayer's increasingly core crop science division was held back by persistent weaknesses in the global agricultural market. Ebitda before special items at the unit rose just 0.6% to EUR318 million.

The crop division has taken center stage since the company agreed last month to acquire Monsanto. The deal would significantly reshape Bayer's portfolio. Crop science sales would comprise roughly half of overall revenue, compared with 30% in 2015, while the health care business would constitute the other half.

Analysts have widely said the two companies are complementary. Bayer has a strong footprint in crop protection chemicals, while Monsanto is a leader in biotechnology and seeds.

The merged company would be the largest supplier by sales of both seeds and pesticides.

Write to Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

October 26, 2016 06:03 ET (10:03 GMT)

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