Agribusiness giants Bayer AG and Monsanto get approval to merge as US farm groups and environmentalists slam the deal as ‘toxic’.
A multi-billion dollar merger between the agribusiness giants Bayer AG and Monsanto has been approved by the US Department of Justice.
It has been two years since the companies announced the $US66 billion ($88 billion) proposal, with the US anti-trust regulator’s approval the last major regulatory step the deal needed before being officially inked.
Both companies sell a range of crop protection products (pesticides) and crop seeds in Australia, while Bayer also manufactures plastics, medical and veterinary products.
Together the companies control around 80 per cent of the global vegetable seed market, with Australia holding around three per cent.
The original terms of the proposal would have created a monopoly in the US herbicide-resistant cotton and canola seed market, but on Tuesday night the US Justice Department said it had worked through those issues during its year-long investigation into the deal.
“The Department of Justice announced today that it is requiring Bayer AG to divest businesses and assets collectively worth approximately $9 billion in order to proceed with its proposed $66 billion acquisition of Monsanto Company,” it said in a statement.
It is the largest-ever divestiture ordered by the Department of Justice, and includes anything in Bayer’s suite of products that already competes directly with a Monsanto product, including canola, cotton, soybean and vegetable seeds, as well as Bayer’s herbicide business — a competitor of Monsanto’s glyphosate herbicide Roundup.
Bayer already announced it would sell many of these assets to BASF, a fellow German company, and the largest chemical company in the world.
There is also a requirement for divestitures in both companies’ seed treatment businesses to “remedy competitive harm” from the overlap.
“Without the agreed-to divestitures, the proposed merger would likely result in higher prices, lower quality, and fewer choices across a wide array of seed and crop protection products,” the Department of Justice’s statement said.
“The merger also threatened to stifle the innovation in agricultural technologies that has delivered significant benefits to American farmers and consumers.”
No local competition concern
Australian farmers rely on a wide range of products from both companies, especially broadacre, vegetable and cotton farmers.
Many of the seeds, seed treatment, and pesticide products they use are sold through one of the companies.
The Australian Competition and Consumer Commission said in March it would not oppose the merger because of the divestments ordered by European, Canadian and US competition regulators.
“The ACCC previously had concerns the proposed acquisition may substantially lessen competition in the supply of weed management systems for use on canola crops and reduce competitive tension in research and development of new crop protection products.
“The global divestments resolve those competition concerns in Australia,” ACCC agriculture commissioner Mick Keogh said in a statement.
The US arm of environmental group Friends of the Earth labelled the decision to approve the merger as “toxic” and said the merged entity would “drive up food prices and put family farmers out of business”.
The past three years have seen a massive wave of consolidation in the sector, with similar mergers already approved between Dow Chemical and DuPont Pioneer, and ChemChina and Syngenta.
This deal is expected to leave just four major players in the agri-chemical and agri-seed development space.