BASF to Buy Bayer’s Seed Assets for Billions

October 21, 2017 |

In New Jersey, BASF agreed to buy almost all of Bayer’s seed assets including LibertyLink seeds and chemistry for $7 billion, assuming the Bayer acquisition of Monsanto goes through. If all goes as planned, BASF will gain 1,800 Bayer employees, 700 of them in North America and 81 Bayer sites. This is BASF’s first time going into the seed business but would complement BASF’s current products and projects.

According to Western Producer, the deal includes canola, accounting for 45 percent of the total, followed by cotton at 25 percent, soybeans at 20 percent and the LibertyLink license and related global glufosinate-ammonium business making up the remainder. BASF told Western Producer that it will spend $956 million annually on agricultural research and development once the Bayer assets are in the fold.

The Backstory

As reported in the Digest in September 2016, the extended courtship between Bayer and Monsanto, which saw the dowry offer raised four times by Bayer, resulted in a $127.50 per share all-cash offer for Monsanto, which Monsanto’s board accepted last year. A whopping $66 billion in all — one of the largest all-cash acquisitions, ever.

But just because Bayer is acquiring Monsanto, doesn’t mean all activity stops. In fact, we also reported in the Digest in November 2016, that Bayer established a research collaboration with Primordial Genetics to focus on technology and performance of Bayer’s crop protection solutions.

We also reported in the Digest just a month ago about Bayer and Ginkgo Bioworks creation of a new company focused on the plant microbiome — specifically, improving the microbes’ ability to make nitrogen fertilizer available for plants offers a major potential benefit to sustainable agriculture. The deal provides a Series A investment of $100 million by its parent companies and Viking Global Investors LP. The new company will focus on technologies to improve plant-associated microbes with a major focus on nitrogen fixation. The endophytic microbes to be developed by the company aim to provide a platform to flexibly deliver new agronomic advantages.

Now with Bayer’s selling off of their seed assets, it looks like BASF is in a good position for growth beyond its core chemical business and into seeds and herbicides.

In March, the Digest reported that BASF reached a global licensing agreement with the Broad Institute of MIT and Harvard for the use of CRISPR-Cas9 genome-editing technology to improve products in agricultural and industrial microbiology applications. The technology advances genome editing because it has the potential to be a simpler and more precise tool for making targeted changes to a cell’s DNA. This means that with Bayer’s seed business, BASF can now use its genome-editing technology to improve seed traits faster and less expensively than other genome-editing methods.

Scott Kay, vice president of BASF’s U.S. Crop Protection business, told the Triangle Business Journal that domestic facilities that will be transferred to Bayer include sites in both Research Triangle Park and Morrisville, as well as footprints in Michigan, Texas and Alabama. “I think it’s really important to remember that we bought a running, functioning business that was growing, and we plan to continue to do what we can to let that business grow. Should we have any strategic changes, that would come later.”

Check out the Digest’s Slide Guide to BASF.

The Reactions

Paul Rae, BASF’s head of North American Business told AgWeb even though the company will sell cotton, canola and soybean seeds for the first time, Bayer’s business compliments BASF’s current pipeline. “We’ve had an existing and successful traits business for many years, and we’ve had a strong seed treatment business. [It’s] important to recognize that we have been active in the seed industry in a different way.”

“Interesting to see this sale on the table as it in essence will create a third ‘genetics and chemistry’ company,” Bob Young, American Farm Bureau Federation chief economist told AgWeb. “While the scale will be at a different level than other companies, it adds a significant third company for our farmers to look to for new technologies and innovative production tools. We look forward to working with all three companies in the future.”

It is probably good for U.S. farmers,” Dean Cavey, managing partner at Verdant Partners told AgWeb. “I look at it in two ways, first, farmers like and benefit from competition, and now we have another significant player entering the picture. Second you have another major player that is dedicated to R&D and creation of new products.”

So while the consensus is that this deal could be a good thing for those in agriculture, only time will tell. While BASF and Bayer have an integration team working through 2019, it still depends on the approval of Bayer’s acquisition of Monsanto.

The Future

When asked about future plans to enter the corn seed market, Paul Rea, senior vice president of BASF Crop Protection told Farm Futures, “We are open to expand and grow our portfolio long-term,” adding that BASF is entering the seed market in a “meaningful way” and any future expansion would need to be a strategic fit, customer focused and fiscally responsible. He also emphasized that their intent is to “avoid customer interruption” during the process. Rae also sees more investment in Bayer’s LibertyLink technology long-term.

Scott Kay, BASF’s vice president of Crop Protection North America told Farm Futures that there won’t be any name changes right now as they respect the brand reputation Bayer has already built. Kay also told Farm Futures that Bayer’s InVigor canola hybrids have performed well, but they will continue to look for ways to improve seed quality, traits and yields as their ultimate goal is to help “canola perform better in farmers field.”

BASF already has an herbicide portfolio, but Rea told Farm Futures that the deal with Bayer “adds a new mode of action to our portfolio. It provides a new method for us to help farmers fight resistant weeds.”

So as we wait for the Bayer acquisition of Monsanto to move forward, we also wait to see what developments will come of BASF’s big buy.

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