Syngenta and ChemChina Merger Investigated by European Commission

31 Oct 2016 --- The proposed acquisition of Syngenta by ChemChina is being investigated by the European Commission amid concerns a merger could reduce competition in the market and impact on costs for farmers. The in-depth probe has been launched to assess whether this deal is in line with EU Merger Regulation and if it may reduce competition in crop protection products and the supply of certain input chemicals. 

Last week, FoodIngredientsFirst reported how Syngenta has said regulatory approval for its US$43 billion takeover by China National Chemical Corp (ChemChina) will be delayed until the first quarter of next year, as regulators demand extra information to ensure they can green-light the deal. The proposed merger would combine global seed and crop protection giants Switzerland-headquartered Syngenta and ChemChina which controls Adama, the largest supplier of generic crop protections products in Europe. 

The Commission points out that 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. Therefore we need to carefully assess whether the proposed merger would lead to higher prices or a reduced choice for farmers,” says Commissioner Margrethe Vestager, who is in charge of competition policy. 

The Commission’s preliminary concerns center on the fact that Syngenta and ChemChina, through Adama, each have strong partially overlapping portfolios of crops protection products such as 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, soybean, sugarbeet and sunflowers.
“The Commission therefore has preliminary concerns that the proposed merger could reduce competition on these markets and that this in turn could have an impact on price and choices for farmers,” it says. 

“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 Commission also 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 each other; Adama may be an important generic competitor of Syngenta, and Adama has a broad portfolio of products, wide geographic coverage and good access to downstream distributors.
 
The Commission has 90 working days (until March 15, 2017) to take a decision and stresses the opening of this inquiry does not prejudge the final result. It will also be closely cooperative with other competition authorities such as the Federal Trade Commission in the U.S. and the antitrust authorities of Brazil and Canada. 

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

Meanwhile a Syngenta statement reads: “Syngenta and ChemChina have announced that the EU review of ChemChina’s acquisition of Syngenta will enter Phase II with effect from 31 October. The regular duration of Phase II is up to 90 working days. The companies intend to continue constructive discussions with the EU authorities in order to conclude the review as early as possible.”

by Gaynor Selby