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Monsanto-Bayer Deal Raises Regulator Scrutiny for Ag Tie-Ups

We think the deals are still likely to close, although the probability has decreased.

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With  Monsanto (MON) finally accepting  Bayer's (BAYRY) purchase offer, antitrust regulators have a full plate of seed and crop chemical tie-ups to review. With several potential deals being considered together, we think the probability that each of the deals will be approved has decreased compared with a scenario where each deal faces the regulatory bodies on its own.

Still, we think it's more likely than not that all of the deals currently on the table--Bayer's purchase of Monsanto, the merger between  Dow Chemical (DOW) and  DuPont (DD), and ChemChina's purchase of  Syngenta (SYT)--will eventually receive regulatory approval. This view is based on the general lack of product overlap between the companies involved and our belief that selling seeds and crop chemicals together is not a path to increasing competitive advantage. We also think there will be more than enough competition among the remaining players to foster future industry innovations. We expect relatively minor divestitures will appease regulators in areas where product portfolios are sufficiently similar.

Jeffrey Stafford does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.