Bayer shares jumped nearly 5% on Tuesday, following a media report that the US Justice Department will allow the German drugs and pesticides group to acquire Monsanto 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 reported late on Monday, citing people familiar with the matter.
Under the deal, Bayer agreed to sell additional seed and treatment assets to BASF and agreed to make concessions related to digital agriculture, it said.
Bayer shares rose 4.7% by 0800 GMT to reach a one-month high.
Monsanto Shares Reach Four-Year High
Baader Helvea analyst Markus Mayer said that he expects that 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 that 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.%, at $125.15.
Souring Global Farm Economy
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," Hauter said.
Bayer declined to comment on the report, but said in a statement that it still anticipated closing the Monsanto purchase in the second quarter.
BASF, Monsanto and the Justice Department declined to comment.
Regulatory Approvals
Last week, Monsanto said in a quarterly earnings report that it was confident that the US 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 US.
EU 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 and Dupont, and a tie-up of ChemChina and Syngenta.
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