Bayer, Monsanto Tie-Up Creates Unexpected Opportunities For Buyers

Bayer, Monsanto Tie-Up Creates Unexpected Opportunities For Buyers

BASF has agreed to acquire a number of Bayer’s seed and herbicide units for €5.9 billion. The deal includes brands such as Liberty, Basta and Finale, securing BASF a set of businesses that generated sales of around €1.3 billion in 2016 and EBITDA of €385 million.

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While the deal will add to BASF’s herbicide portfolio, it also marks the first time the company has stepped into the seeds arena. Why now?

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For Bayer, the divestment is a part of its ongoing effort to convince regulatory authorities to approve its mammoth $66 billion takeover of Monsanto. In August, the European Commission opened an in-depth investigation into the deal on the grounds that it could reduce competition in the seeds, pesticides and traits areas—not least because Bayer's LibertyLink brand herbicide vies directly with Monsanto's Roundup line of weed killers. The closing of this divestment could go a long way to sealing the Monsanto acquisition.

With the wave of M&A in Big Ag set to crest, more opportunities for sharp-eyed buyers looking to put capital to work could also emerge. In this case, snapping up Bayer’s portfolio gives BASF a readily established share of the seeds market with proven revenue streams, which is much less demanding a move than setting up shop on its own. It could also provide BASF a platform for further M&A in the space.

Meanwhile, as the knock-on effects of multibillion-dollar cross-border mergers spur increasingly stringent competition authorities to take action, there's the distinct potential for a high number of spinoffs like this to come—and not only in the agrochemicals space.

Teva’s sale of Allergan’s UK and Ireland generics business last year for $796 million, in a bid to get its own $40.5 billion deal of Actavis Generics approved by the Commission, is just one example of a mega-deal contributing to a possible reversal of fortunes for European spin-offs.

Check out the 2017 Finistere Ventures & PitchBook Agtech Investment Review.

Article by Sean Lightbrown, PitchBook

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