10 Apr

Bayer-Monsanto Merger Approval Came after Divestments


Addressing concerns

In Bayer-Monsanto Deal Receives European Union Approval, we discussed some of the concerns that delayed the approval of the Bayer-Monsanto (MON) merger by antitrust officials in various jurisdictions (XLB). Some of the concerns included higher prices due to monopoly, challenges due to research and development and innovation, a higher concentration that might lead to market dominance, and limited choices for customers.

Bayer-Monsanto Merger Approval Came after Divestments

Settling concerns with divestments

Large overlaps in the business have been a concern for antitrust regulators. Bayer and Monsanto are complementary businesses with minimal overlap. For example, Monsanto’s core is the seed genetics business, while Bayer’s core is the pesticides business.

According to a Wall Street Journal report on the deal, Bayer agreed to sell its seed-related assets and make similar arrangements in its digital agricultural business in order to meet the US approval requirements.

In another recent deal, PotashCorp (POT) (NTR) and Agrium (AGU) made similar arrangements to divest their businesses to satisfy antitrust concerns.

Monsanto’s earnings

Recently, Monsanto reported its 2Q18 earnings with an EPS (earnings per share) of $3.22, which missed analysts’ mean estimate of $3.30. However, there was a 1% gain in the EPS year-over-year from $3.19 in fiscal 2Q17. To learn more, read Monsanto Released Fiscal 2Q18 Earnings: Some Key Takeaways.

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