Chicago U.S. seeds and agrochemicals company Monsanto Co (MON.N), which is in the process of being bought by Germany's Bayer AG (BAYGn.DE) for $66 billion, swung to a quarterly profit, helped by higher demand from South America.
Sales of soybean seeds and traits jumped 37 percent as more farmers in South America sowed the company's genetically modified soybean seed Intacta RR2 Pro.
But how Monsanto is navigating through a souring U.S. agricultural market has been closely watched by Bayer's investors, who have backed the German pharmaceutical conglomerate’s bid to acquire the world’s largest seed company.
Monsanto shareholders voted in December to approve a sweetened $128-per-share offer from Bayer that, if approved by regulators, would create a company commanding more than a quarter of the world market for seeds and pesticides and be the largest-ever cash takeover of a U.S. company.
Both companies have filed notice of the merger plan to U.S. antitrust officials and plan to submit similar documents to the European Union by the end of March, Chief Executive Officer Hugh Grant told analysts on a conference call on Thursday for Monsanto's first fiscal 2017 quarterly results.
Bayer and Monsanto executives have repeatedly said they are confident the deal will pass regulatory muster, a necessary step in order to close the sale as expected in late 2017. Bayer has said it is committed to divest up to $1.6 billion of its portfolio to win approval.
Still, some farm groups, rival seed companies and U.S. lawmakers have raised concerns about the Monsanto-Bayer deal, saying it could raise prices and reduce choices for farmers.
While Grant did not discuss what business units or assets might be sold off to appease regulators, he did tell analysts on Thursday that "where overlaps do exist, Bayer anticipates and is committed to undertake a certain level of divestitures as required by regulatory agencies."
Increased research and development spending by the combined companies and plans to develop a global seeds and biotechnology hub in St. Louis fuel hopes regulators will not block the deal, which was agreed in September, Monsanto CEO Hugh Grant told Reuters.
Grant also told analysts that he and Chief Technology Officer Robb Fraley have been taking an active role in talking to farmers about the proposed deal, as well as talking to "key policymakers and politicians" to assuage concerns.
Monsanto announced Thursday it had recently signed an agreement with Japanese trading firm Mitsui & Co. to sell its Latitude wheat and barley fungicide seed treatment business for $140 million - and expects to receive an EBIT benefit of approximately $85 million in that business segment in the second quarter.
Monsanto told Reuters that the agreement is part of ongoing restructuring efforts, and not tied to the Bayer deal.
Net profit attributable to Monsanto was $29 million, or 7 cents per share, in the first quarter ended Nov. 30, compared with a loss of $253 million, or 56 cents per share, a year earlier.
Excluding items, the company earned 21 cents per share. Net sales rose more than 19 percent to $2.65 billion.
Monsanto shares were up 51 cents at $105.57 per share in afternoon trading on the New York Stock Exchange.
(Additional reporting by Arathy S Nair in Bengaluru.; Editing by Shounak Dasgupta and Bernadette Baum)