BASFY BASF SE (QX)

Company readies more asset sales to win regulatory approval of Monsanto takeover

By Zeke Turner and Natalia Drozdiak 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 1, 2018).

German chemical giant Bayer AG is preparing to sell more assets to win antitrust approval for its $60 billion-plus takeover of Monsanto Co., as it aims to complete the deal by midyear.

"We have now also committed to divest our entire vegetable-seed business, " Chief Executive Werner Baumann said Wednesday in an earnings conference call, adding that other businesses may be sold or licensed.

In October, Bayer agreed to sell parts of its crop-science business to rival BASF SE for $7 billion in order to smooth the way for its purchase of St. Louis-based Monsanto.

Mr. Baumann declined to comment on the value of the assets Bayer is considering selling and what share of company 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 of the Monsanto deal 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 the deal could pressure farmers, is expected to decide by April 5.

The deal for the U.S. seed maker, if completed, would create a sector powerhouse and tilt Bayer heavily toward agriculture in a long-term bet on high-tech crops.

Bayer has faced delays in winning approval for the deal in the U.S. and Europe partly because of negotiations over asset sales and the large amount of documents regulators have to process. The U.S. Department of Justice's antitrust review continues.

Mr. Baumann expressed optimism that the deal, which has already passed muster with Brazilian regulators and the Committee on Foreign Investment in the U.S., will go through.

Bayer, which had hoped to close the deal early this year, is now aiming for completion in the second quarter. 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 released fourth-quarter earnings and an outlook that were below expectations. Its shares fell 1.9% to EUR96.23 on Wednesday.

The company said net profit fell 67% in 2017's final quarter to EUR148 million ($181 million), from EUR453 million a year earlier, and below a consensus analyst forecast of EUR745 million.

The earnings decline reflected a EUR455 million charge related to U.S. tax reform and persistent problems with its crop-science business in Brazil, a key agricultural market that has been in 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, partly reflecting the sale of part of the company's stake in plastics maker Covestro AG.

While Bayer executives hope to get a boost from the Monsanto deal, the company on Wednesday said it expects sales and earnings this year to be flat with 2017. The forecast includes expected supply interruptions because of plant maintenance.

Adjusting for currency effects and changes to its portfolio, including the takeover, Bayer said it expects sales to log low- to mid-single-digit percentage growth.

The company 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 own 14.2% of the company, which it separated from in 2015, and Its pension trust holds another 8.9%.

--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

March 01, 2018 02:47 ET (07:47 GMT)

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