EU approves €54bn Bayer-Monsanto deal

By Will Chu

- Last updated on GMT

©iStock
©iStock
The European Commission has approved Bayer’s proposed acquisition of Monsanto, with the German pesticides supplier committed to selling off certain parts of its business as part of the agreement.

The sale of Bayer’s herbicide and seeds businesses to BASF is a condition of the deal designed to assure authorities that competition in the EU would remain strong and promote product innovation.

“We have approved Bayer's plans to take over Monsanto because the parties' remedies, worth well over €6bn, meet our competition concerns in full,” ​said Margrethe Vestager, the EU’s competition commissioner.

Further requirements of the deal will see Bayer offering licensing agreements to BASF of its digital farming portfolio.

As well as the €5.9bn sale of Bayer’s herbicide and seeds business that completed in October last year, BASF has also agreed to buy Bayer’s vegetable seed business for roughly €1.5bn.

Trio of mega-mergers

The Bayer/Monsanto merger is the third in a row in the seeds and pesticides sector and is set to face similar scrutiny by European authorities, who are considering the competition implications following the Dow/DuPont merger and the ChemChina/Syngenta merger.

These mergers were also subject to the break up and sale of significant parts of their business to dispel fears of reduced competition.

A large part of the Commission’s concerns includes the choice of seed varieties that bring high yields in the soil and climate that the crop is cultivated in.

Monsanto is the largest supplier of seeds in the world with Bayer a comparatively smaller player, active in selected crops. However, it has extensive research & development activities.

In Europe, Bayer and Monsanto compete in the supply of vegetable seeds, oilseed rapeseeds and cottonseeds, and Bayer has generally been an active and important challenger to Monsanto. The companies also compete in genetically-modified (GM) and non-GM traits.

In terms of geographic footprint, Bayer makes about 30% of its sales in Europe, whilst Monsanto makes less than 10% of its sales in Europe.

In response to the Commission's competition concerns Bayer has “committed to divest its entire vegetable seed business, including its R&D organisation, to a suitable buyer currently not active in vegetable seeds”.

“This would allow the buyer to replicate the competitive constraint previously exercised by Bayer on Monsanto and ensure that the number of global vegetable seeds R&D players remained the same.”

Digital agriculture concerns

The Commission also extended its concerns to the use of satellite pictures, weather data and private data collected from farmers' fields as a result of this merger.

They believed the deal would reduce potential competition in Europe between Bayer's recently launched Xarvio offering and Monsanto's FieldView platform, which is about to be launched in Europe.

Bayer countered by licencing a copy of its worldwide current offering and pipeline on digital agriculture to BASF, maintaining competition by allowing BASF to replicate Bayer's position in digital agriculture in the European Economic Area (EEA).

They believed this would ensure that the race to become a leading supplier in Europe in this emerging field remained open.

Competition is crucial

Vestager also commented on the campaign of emails, postcards, letters and tweets expressing concerns​about the proposed acquisition adding, “While these concerns are of great importance, they cannot form the basis of a merger assessment”.

“Today's transaction is the third in a series of mergers that are reshaping the sector,”​ she said.

“That is a lot of change in a short time. But EU merger control has made sure that none of these mergers has resulted in less competition on price or innovation in Europe.

“In each case, the parties had to make significant commitments that protect effective competition. These ensured that no research and development capabilities were lost, in an industry where innovation is particularly important. And the commitments ensured there continues to be strong competition in each area.”

She added that Bayer could only merge with Monsanto, if the Commission found that BASF could replace Bayer as the fourth player [in the market] by essentially taking over Bayer's current seeds and trait activities. She set the 16 April as the deadline to finalise this decision.  

“Merging parties will also continue to face strong competition from Dow/DuPont and Syngenta as well as from pure seeds players such as Limagrain and KWS.”

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