Bayer-Monsanto: US$62.5bn mega-merger another step closer as EU conditionally approves tie-up
22 Mar 2018 --- The Bayer-Monsanto tie-up has cleared another big hurdle as the European Commission (EC) conditionally approved the acquisition – the latest green light from antitrust regulators which brings the creation of a company with control of more than a quarter of the world’s seed and pesticides market closer to reality. Despite a wave of opposition from farming groups and environmentalists, German conglomerate Bayer has won EU antitrust approval to acquire the US seed giant – but it comes with conditions.
The conditions cover in particular the divestment of certain Bayer businesses, including the global field crop seeds business such as canola, cotton, and soybean (with minor exceptions restricted to the Asia region), the R&D platform for hybrid wheat, the global vegetable seeds business, the global glufosinate ammonium business as well as certain glyphosate-based herbicides in Europe, predominantly for industrial use.
Also, Monsanto’s global business with the nematicide NemaStrike must be divested.
The conditions also stipulate the transfer of three Bayer research projects in the area of non-selective herbicides and the granting of a license to Bayer’s digital farming portfolio. BASF is the intended purchaser of these assets.
Earlier this month, BASF had exclusive talks to acquire Bayer’s entire vegetable seeds business, Nunhems with plans to enhance its future seed platform and strengthen the market position of its agricultural solutions business through this transaction.
“We have approved Bayer's plans to take over Monsanto because the parties' remedies, worth well over €6 billion, meet our competition concerns in full. Our decision ensures that there will be effective competition and innovation in seeds, pesticides and digital agriculture markets also after this merger,” said Commissioner Margrethe Vestager, in charge of competition policy.
“In particular, we have made sure that the number of global players actively competing in these markets stays the same. That is important because we need competition to ensure farmers have a choice of different seed varieties and pesticides at affordable prices.”
“And we need competition to push companies to innovate in digital agriculture and to continue to develop new products that meet the high regulatory standards in Europe, to the benefit of all Europeans and the environment.”
Bayer has now received approvals for the transaction from substantially more than half of the 30 regulatory authorities, including those in Brazil and China.
The Commission’s conditional approval comes after an in-depth investigation examining more than 2,000 different product markets and 2.7 million internal documents. It also received more than one million petitions concerning the deal.
It concluded that the transaction as notified would have significantly reduced competition on price and innovation in Europe and globally on different markets. The Commission also had concerns that it would have strengthened Monsanto's dominant position on certain markets, where Bayer is an important challenger of Monsanto.
Consolidation reshaping agrochemical industry
The Bayer-Monsanto acquisition is the latest in a series of so-called “mega-mergers” that is reshaping the agrochemical and agricultural industries, with Dow and Dupont and ChemChina and Syngenta earlier leading a wave of consolidation in the sector. This consolidation has been prompted by shifting weather patterns, competition in grain exports and a fluctuating farm economy.
Just like the Bayer-Monsanto acquisition the Dow and Dupont and ChemChina and Syngenta deals secured EU approval only after the companies offered substantial divestments.
“Receipt of the European Commission’s approval is a major success and a significant milestone,” said Bayer CEO Werner Baumann.
“Together with Monsanto, we want to help farmers across the world grow more nutritious food in a more sustainable way that benefits both consumers and the environment.”
What has Bayer pledged to do?
The commitments submitted by Bayer addressed the EU’s competition concerns and the company has pledged to do the following:
- Remove all of the parties' existing overlaps in seed and pesticide markets, where concerns were raised, by divesting the relevant Bayer businesses and assets.
- The commitments cover Bayer's global R&D organization for seeds and traits as well as Bayer's research activities to develop a challenger product to Monsanto's glyphosate. They also cover certain Monsanto assets, which in future would have competed with a Bayer seed treatment against nematode worms.
- Bayer has committed to grant a license to its entire global digital agriculture product portfolio and pipeline products to ensure continued competition in this emerging market.
Digital farming
Farming groups and environmentalists oppose the Bayer-Monsanto merger just as they have done with the Dow and Dupont and ChemChina and Syngenta deals.
And when it comes to seeds and pesticides, the EC also recognizes there are other “vital concerns” that go beyond competition policy, including consumer protection, food safety and ensuring the highest standards for the environment and the climate.
The strict national and European regulatory standards on these matters will remain just as strict after this merger as before it and continue to apply, insists the EC.
Digital agriculture uses public data such as satellite pictures and weather data as well as private data collected from farmers' fields. It applies agronomic knowledge and algorithms to that data to recommend to farmers how to best manage their fields.
For example, how many seeds to use and on how much and when to use pesticide and fertilizer. This makes digital agriculture important, not only to farmers but also to the environment.
The Commission’s conditional approval, which paves the way for the creation of the world's largest and most powerful agribusiness company, continues to be heavily scrutinized by opposition groups, including Friends of the Earth (FoE), which describes the Bayer-Monsanto deal as “a marriage made in hell.”
FoE says that the proposal allows BASF access to their expanding digital farming businesses and the creation of these massive farm data collection platforms will enable the merged Bayer-Monsanto, as well as BASF, to increase their control over farmers and cut out competitors, and allow it to become the dominant “Facebook of farming.”
“This merger will create the world's biggest and most powerful agribusiness corporation, which will try to force its genetically modified seeds and toxic pesticides into our food and countryside,” said Adrian Bebb, food and farming campaigner at FoE.
“The Commission decision also allows them, together with BASF, to become data giants in agriculture – the 'Facebooks of farming' – with all the pitfalls that entail. The coming together of these two is a marriage made in hell – bad for farmers, bad for consumers and bad for our countryside.”
Over a million people called on Competition Commissioner Vestager to block the merger and a recent opinion poll suggests 54 percent of EU citizens thought it was “very” or “fairly important” that the European Commission blocked it – more than three times the number that thought it was unimportant.
The YouGov survey results from Germany, France, Spain, Denmark and the UK also shows that the merger gives 47 percent of EU citizens “serious” or “very serious” concerns.
Citizens also expressed concerns that the merger would negatively affect the farmers' choices of what crops they would be able to farm, the environment, and the number of chemical substances used in farming to control pests and weeds.
The merger still needs approval in other major markets, such as the US and Russia.
The transaction remains subject to customary closing conditions, including receipt of required regulatory approvals.
Bayer and Monsanto are working closely with the authorities – including the Department of Justice in the United States – with the goal of closing the transaction in the second quarter of 2018.
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