Sector News

EU opens in-depth investigation into Bayer's proposed acquisition of Monsanto

August 23, 2017
Chemical Value Chain

The European Commission said today that it has opened an in-depth investigation to assess the proposed acquisition of Monsanto by Bayer under the EU merger regulation.

The commission has concerns that the merger may reduce competition in areas such as pesticides, seeds, and traits. The transaction was notified to the commission on 30 June 2017 and the commission now has 90 working days, until 8 January 2018, to take a decision. On 31 July 2017, Bayer and Monsanto submitted commitments to address some of the commission’s preliminary concerns. However, the commission considered these commitments insufficient to clearly dismiss its serious doubts as to the transaction’s compatibility with the EU merger regulation.

The commission says it has preliminary concerns that the proposed acquisition could reduce competition in a number of different markets resulting in higher prices, lower quality, less choice, and less innovation. In the field of pesticides, Monsanto’s glyphosate is the most sold nonselective herbicide in Europe. Bayer produces glufosinate ammonium, also a nonselective herbicide and one of the very few alternatives to glyphosate. According to the commission’s preliminary investigation, Monsanto and Bayer are two of a limited number of competitors in this field capable of discovering new active ingredients and developing new formulations, including addressing the growing problem of weed resistance to existing products. Bayer already said that it would divest its LibertyLink seeds business and the associated Liberty-branded herbicide product line as part of the $66 billion acquisition of Monsanto.

In addition, the commission will further assess both Monsanto’s activities in biological pesticide products that would compete with Bayer’s existing portfolio of chemical pesticide products, and the parties’ overlapping activities in products that tackle varroa mites, a parasite affecting bee colonies in Europe.

In the field of seeds, Bayer and Monsanto are both active in the breeding of vegetable seeds. The commission’s initial investigation shows that the parties have high combined market shares in a number of these vegetable seeds markets, and that some of their products compete directly with each other. Bayer and Monsanto are also active in the breeding and licensing of seeds for several field crops. Monsanto has the highest market share in canola seeds in Europe while Bayer, with the highest market share in canola seeds globally, is one of the few players with the means to compete intensively in this market. Both parties are important licensors of cotton seeds to their competitors in Europe, and both are investing in research and innovation programs for wheat.

The commission’s preliminary investigation into traits competition indicates that Monsanto has a dominant position in several traits markets worldwide. Bayer is one of the few competitors to Monsanto in certain traits markets, and has developed alternative herbicide tolerance traits to Monsanto’s. The commission will investigate in particular whether the transaction could lead to a reduction of competition in these markets, taking into account the existing links between the few worldwide competitors through cross-licensing and through cooperations in R&D.

The commission says that as the merged entity would hold both the largest portfolio of pesticides and the strongest global market positions in seeds and traits, making it the largest integrated company in the industry, it will further investigate whether competitors’ access to distributors and farmers could become more difficult if Bayer and Monsanto were to bundle or tie their sales of pesticides and seeds, notably with the advent of digital agriculture. Both Bayer and Monsanto are currently investing in this emerging technology.

Given the worldwide scope of Bayer and Monsanto’s activities, the commission is cooperating closely with other competition authorities, notably with the Department of Justice in the United States and the antitrust authorities of Australia, Brazil, Canada, and South Africa.

Bayer today confirmed that the commission has initiated a Phase II investigation of the proposed combination of Bayer and Monsanto. The company says it had expected further review of the proposed acquisition of Monsanto because of the size and scope of the transaction. Bayer believes that the proposed combination will be highly beneficial for farmers and consumers, and will continue to work closely and constructively with the European Commission in its investigation with a view to obtaining approval by the end of this year.

“Seeds and pesticide products are essential for farmers and ultimately consumers. We need to ensure effective competition so that farmers can have access to innovative products, better quality, and also purchase products at competitive prices. And at the same time maintain an environment where companies can innovate and invest in improved products,” said Margrethe Vestager, commissioner in charge of competition policy.

The proposed acquisition of Monsanto by Bayer would create the world’s largest integrated pesticides and seeds company combining two competitors with leading portfolios in nonselective herbicides, seeds and traits, and digital agriculture. Both companies are active in developing new products in these areas. Moreover, the transaction would take place in industries that are already globally concentrated, following the recent mergers of Dow and DuPont and Syngenta-ChemChina, in which the commission intervened to protect competition for the benefit of farmers and consumers.

By Natasha Alperowicz

Source: Chemical Week

comments closed

Related News

May 21, 2022

Sika opens new manufacturing plant in Bolivia 

Chemical Value Chain

Sika AG (Baar, Switzerland) has opened a new plant in Santa Cruz de la Sierra, thus doubling its production capacity for mortar and concrete admixtures in Bolivia. With this new facility in one of the country’s main industrial agglomerations, Sika is positioning itself for continued growth in the dynamic Bolivian construction market.

May 21, 2022

Chevron increases renewable fuel market share with REG acquisition

Chemical Value Chain

Chevron Corporation (NYSE: CVX) and Renewable Energy Group, Inc. (NASDAQ: REGI) (REG) announced on Monday a definitive agreement under which Chevron will acquire the outstanding shares of REG in an all-cash transaction valued at $3.15 billion, or $61.50 per share.

May 21, 2022

Lotte Chemical to invest $8 bn on hydrogen energy, battery materials by 2030

Chemical Value Chain

Lotte Chemical Corp. will invest 10 trillion won ($8 billion) on hydrogen and battery materials through 2030 to achieve annual revenue of 50 trillion won and carbon neutrality. The Korean chemical producer on Thursday unveiled its new corporate vision outlining key corporate strategies with focus on growth through hydrogen energy and battery materials businesses.