E.U. opens in-depth investigation of Monsanto, Bayer merger

by Susan Reidy
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Wheat
 
BRUSSELS, BELGIUM – The European Commission has opened an in-depth investigation into the proposed merger of Monsanto Co. and Bayer AG due to concerns that the deal will reduce competition in areas such as pesticides, seeds and traits.

“Seeds and pesticide products are essential for farmers and ultimately consumers,” said Commissioner Margrethe Vestager, in charge of competition policy. “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.”

The commission has until Jan. 8, 2018, to make a decision. The opening of an in-depth investigation does not prejudge the final result of the investigation, the commission said.

The proposed acquisition of U.S.-based Monsanto by Germany-based Bayer would create the world’s largest integrated pesticides and seeds company. Bayer on Sept. 14 agreed to acquire Monsanto in an all-cash transaction for $128 per share, equating to a total purchase price of approximately $66 billion.

The deal would combine two competitors with leading portfolios in non-selective herbicides, seeds and traits, and digital agriculture, the commission said. Both companies are active in developing new products in these areas.

In explaining the in-depth review, the commission noted that the industries the transaction would take place in are already globally concentrated. It specifically noted the mergers of Dow and DuPont and Syngenta and ChemChina.

The commission also conducted an in-depth review of the Syngenta/ChemChina deal, and in April approved the merger noting that ChemChina had “offered significant remedies, which fully address our competition concerns.”

The commission said it has preliminary concerns that the proposed Monsanto/Bayer deal could reduce competition in a number of different markets resulting in higher prices, lower quality, less choice and less innovation. In particular, the initial market investigation identified preliminary concerns in the following three areas:

  • Pesticides: Monsanto’s pesticide product glyphosate is the most sold non-selective herbicide in Europe. Bayer produces glufosinate ammonium, also a non-selective herbicide and one of the 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.
  • Seeds: Bayer and Monsanto are active in the breeding and licensing of seeds for several field crops. Monsanto has the highest market share in oilseed rape seeds in Europe. Bayer, with the highest market share in oilseed rape seeds at global level, is one of the few players with the means to compete intensively in this market. Both are investing in research and innovation programs for wheat.
  • Traits: The commission’s preliminary investigation 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 notably 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 research and development cooperations.
The commission said 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 pesticide products and seeds, notably with the advent of digital agriculture
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