BASF to buy businesses from Bayer for $7 billion

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As Bayer tries to convince competition authorities to approve its planned acquisition of Monsanto, BASF has agreed to buy seed and herbicide businesses from Bayer for 5.9 billion euros (7 billion US dollar) in cash.

BASF, the world’s third-largest maker of crop chemicals, has so far avoided seed assets and instead pursued research into plant characteristics such as drought tolerance, while its 66 billion US dollar deal with US seeds group Monsanto, which is announced in September 2016, has created opportunities for rivals to take assets that need to be sold in order to satisfy competition authorities.

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.

“BASF’s decision to acquire seed 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.

BASF has agreed to buy seed and herbicide businesses from Bayer for 5.9 billion euros (7 billion US dollar) in cash, as Bayer tries to convince competition authorities to approve its planned acquisition of Monsanto. /VCG Photo

“Nonetheless, the proposed assets for acquisition are high margin and high growth and represent a sensible bolt-on addition,” they added.

BASF will finance the acquisition through a combination of cash on hand, commercial paper and bonds. It expects the acquisition to add to its earnings by 2020.

The businesses Bayer is selling to BASF generated 2016 sales of 1.3 billion euros. While the Commission could block the deal, it has approved others, such as Dow’s tie-up with DuPont and ChemChina’s takeover of Syngenta - although only after securing big concessions. Bayer said it continued to work with the authorities to close the Monsanto deal by early 2018.

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.

The businesses Bayer is selling to BASF generated 2016 sales of 1.3 billion euros. /VCG Photo

BASF has committed to maintaining all permanent positions, under similar conditions, for at least three years after the deal closes, Bayer said.

As part of the deal, BASF will acquire Bayer’s manufacturing sites for glufosinate-ammonium production and formulation in Germany, the United States, and Canada, seed breeding facilities in the Americas and Europe as well as trait research facilities in the United States and Europe.

Bayer said it would use the proceeds of the sale to partially refinance the planned acquisition of Monsanto. It would provide an update on expected synergies from the acquisition by the time the deal closes.

Source(s): AP ,Reuters