Bayer Sells, BASF Buys

By Pam Smith
DTN Progressive Farmer Crops Technology Editor

DECATUR, Ill. (DTN) -- BASF has made no secret that it was shopping for acquisitions this past year. But the Oct. 13 announcement that it will spend $7 billion ($5.9 billion Euro) to buy part of Bayer AG's agricultural products business thrusts the Ludwigshafen, Germany-based company onto all new turf.

With the acquisition, BASF would become a seed company for the first time -- despite repeated executive statements over the years expressing the desire to be the chemical company that sold innovation to seed companies. The deal on the table has BASF purchasing major portions of Bayer's cotton, canola and soybean seed businesses.

Also included in the deal is Bayer's non-selective glufosinate-ammonium business, sold under the trade name Liberty, and the LibertyLink trait portfolio, which allows crops to tolerate applications of Liberty herbicide. On a call with investors, BASF CEO Kurt Bock said the company might consider additional seed deals as it gains more experience in the seed business.

The purchase comes amid a flurry of mega-deals among agrochemical companies. Syngenta with their NK and Golden Harvest seed lineup had been rumored to be a frontrunner of the LibertyLink portfolio as Bayer looked to spin off assets to satisfy regulators and solidify its purchase of Monsanto. However, BASF had begun to stand alone in the field as agrochemical companies have increasingly aligned themselves with seed. The new combined DowDuPont company heads to the field with Pioneer and a handful of heritage Dow brands in their portfolio.

BASF has been a long-term partner with Monsanto -- collaborating in the development of drought-tolerant corn and cotton traits, nematode-resistant soybeans, improved nitrogen utilization and yield traits in canola, corn, cotton and wheat.

At a 2016 global media conference, Markus Heldt, president of BASF's Crop Protection Division, was outspoken on his company's willingness to invest in agriculture. "Our portfolio, pipeline, ability to move fast and to understand farmers' needs give us a solid competitive position," Heldt said. "The agrochemical market is evolving and we are actively pursuing opportunities arising from ongoing merger efforts to increase our footprint and value offer."

Bayer said in a news release that the assets to be sold generated net sales of approximately $1.3 billion EUR in 2016. "We are taking an active approach to address potential regulatory concerns, with the goal of facilitating a successful close of the Monsanto transaction," explained Werner Baumann, chairman of the board of management of Bayer AG. "At the same time, we are pleased that, in BASF, we have found a strong buyer for our businesses that will continue to serve the needs of growers and offer our employees long-term prospects."

At a global meeting in mid-September, Liam Condon, Bayer's president of the Crop Science Division, said the company hoped to wrap up the Monsanto acquisition by late January 2018. It's been slightly more than one year since Bayer announced it had signed a definitive agreement to acquire Monsanto for $66 billion. In response to a DTN question at that time, Condon explained that Bayer had pledged to divest overlapping business assets representing up to $1.6 billion in annual sales if necessary to answer antitrust concerns.

The Oct. 13 announced sale to BASF would include nearly all of the company's field crop seeds businesses, as well as respective research and development capabilities. The seeds businesses being divested include the global cotton seed business (excluding India and South Africa), the North American and European canola seed businesses and the soybean seed business. The transaction includes the transfer of relevant intellectual property and facilities, as well as more than 1,800 employees primarily in the United States, Germany, Brazil, Canada and Belgium.

As part of the agreement, BASF has committed to maintain all permanent employment positions, under similar conditions, for at least three years after closing the transaction. "We are very grateful to our employees, who have played a key role in the success of these businesses over the years," Baumann said. "At the same time, we are aware of the need to address certain overlaps in the combined product portfolio of Bayer and Monsanto."

The transaction is still subject to regulatory approvals as well as the successful closing of Bayer's acquisition of Monsanto.

Bayer and Monsanto stock climbed on the news; BASF stock was off slightly.

Pam Smith can be reached at Pam.Smith@dtn.com

Follow Twitter @pamsmithdtn

(GH/AG)

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