Pharma giant Bayer will sell some assets to its German rival BASF to gain regulatory approval for its takeover of US firm Monsanto, and create a company that will control more than a quarter of the world seed's market.
German chemical company BASF — the world's largest chemical producer — has completed a deal to buy €5.9 billion ($7 billion) worth of Bayer's agricultural products business.
Bayer, the Leverkusen-based multinational that specializes in pharmaceuticals and chemicals, recently agreed a €56 billion takeover of US seeds company Monsanto and the deal with BASF is part of their plan to divest themselves of assets in order to fund the Monsanto deal and improve their chances of gaining regulatory approval.
For BASF, which is headquartered in the southern German city of Ludwigshafen, the deal, which is their biggest ever acquisition, marks a long-awaited entrance into the genetically-modified seeds market.
The assets to be acquired by BASF include Bayer's herbicide business, commercialized under the Liberty, Basta and Finale brands, as well as several parts of its seed businesses in the Americas and Europe. As well as the transfer of assets, the deal will see more than 1,800 staff switch from Bayer to BASF; the majority of whom are based in the United States, Germany, Brazil, Canada and Belgium.
"BASF needed to buy a seeds business," Jeremy Redenius, an analyst, told Bloomberg. "The industry business model is shifting toward chemical and seeds business being sold together."
A changing market
The assets that BASF have acquired earned revenues of 1.3 billion euros in 2016. The deal will see them make major steps into the agrochemical and biotechnological markets, seen as increasingly important following several major mergers in the industry.
"With this investment, we are seizing the opportunity to acquire highly attractive assets in key row crops and markets. It will be a strategic complement to BASF's well-established and successful crop protection business as well as to our own activities in biotechnology," said Kurt Bock, BASF's chief executive.
From Bayer's perspective, the deal sees them edge closer towards gaining regulatory approval for their massive and somewhat controversial takeover of Monsanto. That will be the largest all-cash deal of all time if it goes through and would create a company that controls more than a quarter of the total world market for seeds and pesticides.
"We are taking an active approach to address potential regulatory concerns, with the goal of facilitating a successful close of the Monsanto transaction," Bayer CEO Werner Baumann said in a statement. "At the same time, we are pleased that, in BASF, we have found a strong buyer for our businesses."
aos/kd (Reuters, dpa)