BRUSSELS, BELGIUM—The European Commission has opened an in-depth probe to assess whether the proposed acquisition of Syngenta by China National Chemical Corp. (ChemChina) is in line with the E.U. Merger Regulation. The European Commission said it will assess whether the deal may reduce competition in crop protection products and the supply of certain input chemicals.

In February, ChemChina, a Chinese state-owned chemical company, offered more than $43 billion cash to buy its Swiss rival Syngenta. Later, Syngenta’s board of directors recommended to the shareholders the sale of Syngenta to ChemChina. On Aug. 22, the Committee on Foreign Investment in the United States (CFIUS) gave approval for the merger. ChemChina then filed for acquisition approval of Syngenta by the European Commission on Sept. 23.

The proposed merger would combine Syngenta of Switzerland, one of the main global seeds and crop protection companies, and ChemChina of China, which controls Adama, the largest supplier of generic crop protection products in Europe. The transaction would take place in an industry that is already relatively concentrated.

"This deal would lead to the combination of a leading crop protection company with one of its main generic competitors,” said Margrethe Vestager, commissioner in charge of competition policy. “Therefore we need to carefully assess whether the proposed merger would lead to higher prices or a reduced choice for farmers."

Syngenta and ChemChina, through Adama, each have partially overlapping portfolios of crop protection products, including herbicides, insecticides, fungicides and plant growth regulators. These products are used for the cultivation of several of the main crops grown in Europe, including cereals, cotton, corn, fruits and vegetables, oilseed rape, soybeans, sugarbeets and sunflowers.

The European Commission's initial investigation identified preliminary concerns in a number of these crop protection markets and suggests that:

• the parties have relatively high combined market shares in many of these markets, and that at least some of each party's products may compete directly with those of the other;
• Adama may be an important generic competitor of Syngenta in many of these markets;
• for a company that focuses on generic crop protection products, Adama has a broad portfolio of products, wide geographic coverage and good access to downstream distributors.

The European Commission therefore has preliminary concerns that the proposed merger could reduce competition in these markets and that this in turn could have an impact on price and choices for farmers.

As well as looking into crop protection markets, the in-depth investigation will also verify whether the merger may negatively affect Syngenta's and ChemChina's supply of active ingredients. These are the key chemical input for other manufacturers to make crop protection products.

The European Commission has until March 15, 2017 to make a decision.

St. Louis, Missouri, U.S.-based Monsanto made a $46 billion merger deal with Syngenta last year. Monsanto stepped away from the deal after Syngenta said it did not meet their financial expectations.

ChemChina has production, research and development, and marketing systems in 150 countries and regions. It is the largest chemical corporation in China, and occupies the 265th position among the Fortune 500. The company’s main businesses include materials science, life science, high-end manufacturing and basic chemicals, among others. Previously, ChemChina has successfully acquired nine industrial companies in France, the U.K., Israel, Italy and Germany.