The Strategist

EU will check Bayer-Monsanto merger

06/29/2016 - 17:23

The competition authority of the European Union said it would hold a thorough check regarding intention of German chemical concern Bayer AG to buy the US company Monsanto, maker of herbicides and seed crops, for $ 62 billion.

The statement was made unusually early, even before the EU has received official notification of the transaction.

"Our final decision (on the Bayer-Monsanto transaction) must be strictly and impartially apply the rules of European merger control," - said the European Commissioner for competition Margrethe Vestager in a letter to two members of the European Parliament, published on the official website of the Green Party.

Green Party deputies Martin Heeslingen and Sven Giegold previously said they are worried about the merger.

"In our study, we take into account our concerns about impact of the Bayer-Monsanto merger on prices, variety of available seeds, as well as research and innovation," - said Vestager. 

Mergers and acquisitions in the chemical industry stepped up in recent years. In December 2015, Dow Chemical Co. and DuPont Co. announced a merger on an equal footing. The cooperation will lead to formation of a company with a market capitalization of more than $ 130 billion. In February, China National Chemical Corp. announced the acquisition of Swiss Syngenta for more than $ 43 billion. Thus, the market may become more concentrated by the time Bayer has officially notified the governing bodies of the EU on the proposed transaction.

Margrethe Vestager is also well-aware of it. She noted that the EU should bear in mind several mergers in the sector that will be taken place when the time to make a decision will come.

"I can assure you that my group to review cases will very carefully examine the three mergers declared in the production of seeds and agricultural chemicals", - said the commissioner. 

Previously, Monsanto had already rejected Bayer’s offer as "financially untenable", but announced its readiness to continue the negotiations. The sides continued to discuss conditions last week. The deal’s fate is also complicated by Euro Commission’s proceedings in respect to glyphosate, one of the main products in Monsanto’s herbicide line (realized under the Ruandap trademark), and a possible ban on its use. Resolution on the use of glyphosate in the EU has been extended to 1.5 years for additional research.

Trying to catch the new wave of industry consolidations, Bayer aims to strike the deal and create the world's largest supplier of seeds, grain plants and pesticides. Monsanto, which tried unsuccessfully to buy Swiss rival Syngenta AG last year, made it clear that it is open to a deal with Bayer. The company, however, did not indicated conditions that would be satisfying.

Monsanto is the world's largest supplier of seed, with a leading position in the segment of the development of biotechnology seed. The transaction will merge the company with Bayer, which has a massive range of pesticides, but no stable ground in the segment of major crops such as corn and soybeans. Competing Dow Chemical Co. and DuPont Co. are also working to create a union, and Syngenta is committed to a strike a 43 billion dollars-deal with China National Chemical Corp.

Bayer held talks with about a dozen banks and was able to ensure more than 60 billion dollars of debt financing required for the transaction. If the deal gets through, Bayer will need to take on Monsanto’s debt of approximately $ 8 billion.


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