Bayer to Sell More Assets to Win Approval for Monsanto Deal -- 2nd Update
February 28 2018 - 10:38AM
Dow Jones News
By Zeke Turner and Natalia Drozdiak
German chemical giant Bayer AG on Wednesday said it would sell
more assets to win antitrust approval for its $60 billion-plus
takeover of Monsanto Co., as it inches toward completing its
regulatory reviews.
Chief Executive Werner Baumann said the company was preparing
the sale of another bundle of assets after agreeing in October to
sell parts of its crop-science business to rival BASF SE for $7
billion.
"We have now also committed to divest our entire vegetable-seed
business, " Mr. Baumann said, adding that additional businesses may
be sold or licensed. He declined to say what the assets could be
worth of what share of Bayer's revenue they could represent.
Those assets could also be sold to BASF, according to people
familiar with the matter. In addition Bayer has agreed to grant
BASF a license for its digital-farming data, the people said.
The review by the European Commission, the bloc's antitrust
regulator, appears headed toward conditional approval, people
familiar with the matter say. The commission, which has flagged
concern that the deal could pressure farmers, is expected to decide
by April 5, though the regulator could issue its ruling
earlier.
Bayer has faced delays in winning antitrust approval in the U.S.
and Europe over its plans to buy the U.S. seed maker, a deal which
will create an industrial powerhouse and tilt the German company
heavily toward agriculture in a long-term bet on high-tech crops.
The delays are partly because of negotiations over asset sales and
the large amount of documents regulators have to wade through as
part of their probes. A review by the U.S. Department of Justice is
also ongoing.
Mr. Baumann expressed optimism that the deal would ultimately
win regulatory approval, with the Committee on Foreign Investment
in the U.S., or CFIUS, and authorities in Brazil already giving the
nod.
Bayer is now aiming to complete the takeover of the St.
Louis-based company in the second quarter, having previously hoped
to close in early 2018. The deal was struck in September 2016 amid
a wave of consolidation in the industry.
Bayer said the enterprise value of the Monsanto takeover has now
fallen to $62.5 billion, from $66 billion, after the U.S. company
paid down some of its debts.
The update on the deal came as Bayer reported
worse-than-expected fourth-quarter earnings and guidance, prompting
its shares to fall 3%.
The company said net profit fell 67% in the last three months of
2017 to EUR148 million ($181 million), compared with EUR453 million
a year earlier, and below forecasts of EUR745 million.
Earnings were hit by a EUR455 million charge related to U.S. tax
reform and ongoing difficulties with its crop-science business in
Brazil, a key agricultural market that has been batting its way out
of a recession.
All of Bayer's business units reported lower quarterly sales and
all but pharmaceuticals posted lower operating profit.
Full-year net profit rose nearly 62% to EUR7.34 billion. The
discrepancy with the weak fourth quarter is partly related to the
sell down of its stake in Covestro AG in late 2017.
This year Bayer executives hope to get a boost from the Monsanto
deal but on Wednesday the company said it expects sales and
earnings to remain at 2017 levels.
The forecast includes expected supply interruptions because of
plant maintenance. Adjusted for currency effects and changes to its
portfolio, including the takeover, Bayer said it expects sales to
increase by a low-to mid-single-digit percentage.
However, Bayer said it remains in good financial shape for the
Monsanto takeover. It has reduced its net debt by nearly 70% over
the past year to EUR3.6 billion, largely because of the sale of
most of its stake in Covestro. Bayer continues to hold 14.2% in the
plastics company, which it separated from in 2015. Its pension
trust holds another 8.9%, the company said.
--Nathan Allen contributed to this article.
Write to Zeke Turner at Zeke.Turner@wsj.com and Natalia Drozdiak
at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
February 28, 2018 10:23 ET (15:23 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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