Bayer offers $8bn R&D spend to win Trump favour for Monsanto deal

German group’s commitment on US spending over 6-year period announced by Trump camp

Bayer, the German conglomerate, said it would invest $8bn in research and development in the US over the next six years as part of its planned acquisition of seed giant Monsanto, Donald Trump’s spokesman Sean Spicer announced on Tuesday.

The US investment could bolster Bayer’s chances of winning approval from US antitrust regulators for its pending acquisition of Monsanto, which would create the world’s largest supplier of seeds and crop sprays to farmers.

The proposed tie-up has coincided with two other big deals in the agrichem sector — ChemChina’s acquisition of Switzerland’s Syngenta and the merger of Dow Chemical and DuPont. Critics fear the wave of consolidation could reduce choice for farmers in markets already dominated by a few large players and ultimately drive up food prices for consumers.

There were also some fears among Monsanto employees that the Bayer acquisition could lead to job losses at the US company’s headquarters in St Louis. Bayer has tried to counter those fears by stressing that St Louis would remain the headquarters of the combined business’s seeds division. Tuesday’s announcement is a further vote of confidence in the US market and in the St Louis operation in particular.

Bayer originally said that the combined Bayer-Monsanto would have an annual agricultural R&D budget of €2.5bn.

It now says it will spend $16bn on agricultural R&D over the next six years, with at least half of that investment to be made in the US. “This is an investment in innovation and people that will create several thousand new high-tech, well-paying jobs after integration is complete,” Bayer said.

Bayer said its chief executive Werner Baumann and Monsanto boss Hugh Grant met Mr Trump last week to talk about the deal and “share their view on the future of the agricultural industry and its need for innovation”.

The German company said the $8bn would be an “investment in the US heartland”, adding that the tie-up with Monsanto would ensure that the “US retains a pre-eminent position as the anchor of the [agricultural] industry”.

Mr Spicer told reporters that Bayer and Monsanto had decided to make the investment in “new domestic expansion” because of the president-elect’s commitment to improving the US business climate. He said Mr Trump had convinced the two companies to make the commitment on R&D.

Since his November electoral victory, Mr Trump has taken credit for multiple US companies adding jobs and expanding their businesses in the US. However sometimes other factors were at stake.

While Mr Trump announced last year that Carrier would keep about 1,000 jobs in Indiana instead of moving them abroad to Mexico, that announcement came after the state of Indiana — vice-president elect Mike Pence’s home state — promised the company $7m in incentives.

Mr Trump also took credit for a promise by Japan’s SoftBank to invest $50bn in the US and create 50,000 new US jobs. However, SoftBank first announced its plans in October, well before Mr Trump won the White House.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.