By Jody Coultas, J.D.
In order to meet divestment conditions set by the European Commission (EC) in its approval of Bayer AG’s acquisition of Monsanto Company, Bayer agreed to sell parts of Bayer's Crop Science business to BASF for up to €1.7 billion. The EC concluded that because BASF does not currently sell seeds or non-selective herbicides and has only recently started to develop a limited offering in digital agriculture, there were no competition concerns with most parts of the transaction.
In 2017, the EC initiated an in-depth investigation of Bayer’s proposed acquisition of Monsanto, given the Commission’s concerns that the merger may reduce competition in areas such as pesticides, seeds, and traits. The transaction would combine two competitors that maintain leading portfolios in non-selective seeds and traits, herbicides, and digital agriculture, and create the world’s largest integrated pesticides and seeds company.
In order to receive approval, Bayer committed to divest an extensive remedy package worth well over €6 billion (the "Bayer Divestment Business") to address the competition concerns on overlaps between Bayer and Monsanto in seeds, pesticides and digital agriculture. The Commission concluded that this divestment package would enable a suitable buyer to sustainably replace Bayer's competitive effect in these markets and continue to innovate, for the benefit of European farmers and consumers.
The divested businesses include: (1) Bayer's entire vegetable seeds business; (2) Bayer's entire broad acre seeds and traits business including its R&D organization, subject to limited carve outs; (3) a number of Bayer non-selective herbicide assets, in particular Bayer's global glufosinate business assets and three lines of research; (4) a number of Bayer nematicidal seed treatment assets and products (sold under the Poncho, VOTiVO, COPeO and ILeVO brands); and (5) Bayer's global digital agriculture assets and products (subject to a temporary license back from BASF to Bayer).
However, the Commission had concerns that the transaction would have reduced innovation competition in the European Economic Area for the development of certain non-selective herbicides as well as potential competition for the production of nematicidal seed treatments. To address these concerns BASF will divest one of the overlapping lines of research for the development of non-selective herbicides and a BASF pipeline nematicidal seed treatment product.
The EC had also required Bayer to sell the Bayer Divestment Business to a suitable purchaser. The Commission continues to assess whether BASF has the ability and incentives to run and develop the Bayer Divestment Business to replicate Bayer as an active competitor in the market, and whether the agreements between Bayer and BASF are in line with the commitments.
"With this move, we are implementing the corresponding undertakings made to the European Commission and other regulatory authorities to allow the successful closing of the Monsanto transaction," said Werner Baumann, Chairman of the Board of Management of Bayer AG. "In BASF, we are pleased that, for these businesses too, we have found a strong buyer that will continue to serve the needs of growers and offer our employees long-term prospects."
Steel wheel merger. The EC also approved the acquisition of German steel wheels manufacturer Mefro Wheels by its competitor Accuride, on the condition that U.S. based Accuride divest its Italian subsidiary Gianetti Ruote to a suitable buyer. The divestment will maintain competition, with three independent suppliers of steel wheels for buses and trucks.
Companies: Bayer AG; Monsanto Company; Mefro Wheels; Accuride
MainStory: TopStory AcquisitionsMergers Antitrust
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