Bayer shares jump on report of U.S. antitrust deal on Monsanto

FRANKFURT (Reuters) - Bayer BAYGn.DE shares jumped nearly 5 percent on Tuesday following a media report that the U.S. Justice Department will allow the German drugs and pesticides group to acquire Monsanto MON.N in a $62.5 billion deal.

The Justice Department reached an agreement in principle with Bayer and Monsanto in recent days after the companies agreed to sell more assets, the Wall Street Journal said late on Monday, citing people familiar with the matter.

Under the deal, Bayer agreed to sell additional seed and treatment assets to BASF BASFn.DE and agreed to make concessions related to digital agriculture, it said.

Bayer shares rose 4.7 percent by 0800 GMT to reach a one-month high.

Baader Helvea analyst Markus Mayer said he expects the concessions granted to the Justice Department probably did not go far beyond asset sales already agreed with the European Commission.

“The selling of these assets and the rights issue ... should start therefore soon and should be positive triggers for the stock,” Mayer said, adding the rights issue should be smaller than initially expected.

Shares of Monsanto, the world’s biggest seed company, approached a four-year high on the news in New York on Monday, before closing up 6.2 percent at $125.15.

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The takeover, one of a trio of major deals in the agribusiness sector in recent years, would create a company with a share of more than a quarter of the world’s seed and pesticides market. A souring global farm economy has spurred consolidation among the major players, triggering protests from environmental and farming groups worried about their market power.

The deal reduces competition for sales of seeds and chemicals to farmers struggling with low crop prices, raising the risk for price gouging, said Wenonah Hauter, executive director for Food & Water Watch, an advocacy group.

“The Justice Department’s paltry divestment approach does little to address the extreme control the merged firm will have over farmers’ data, genetics, biotechnology traits or the associated agrichemical industry,” she said.

Bayer declined comment on the report, but said in a statement it still anticipated closing the Monsanto purchase in the second quarter.

BASF, Monsanto and the Justice Department declined to comment.

Last week, Monsanto said in a quarterly earnings report that it was confident the U.S. and other needed regulatory approvals would be secured within the second quarter. Monsanto did not host its usual conference call with analysts to discuss the earnings because of the pending merger.

The Justice Department said last month that it was still reviewing the deal and noted that genetically modified seeds are largely prohibited in Europe but widely used throughout the United States.

European Union antitrust regulators approved the deal in March after the companies agreed to sell a swathe of assets to BASF. China, Brazil and Australia have also approved the proposed merger.

The deal was preceded by a merger of Dow DWDP.N and Dupont and a tie-up of ChemChina [CNNCC.UL] and Syngenta.

Reporting by Karan Nagarkatti in Bengaluru, Diane Bartz in Washington and Tom Polansek in Chicago, Ludwig Burger in Frankfurt; Editing by Leslie Adler/Diane Craft/Susan Fenton