Cape Town – The Competition Commission has approved, with conditions, a merger in which chemicals and pharmaceuticals company Bayer intends to acquire Monsanto.
In a statement issued on Sunday, the Commission said it identified competition concerns in the market for the supply of genetically modified (GM) cotton seeds as it is a merger to monopoly in South Africa.
Bayer operates in the crop protection business in South Africa and sells fungicides, insecticides, herbicides and seed treatment products among others.
Monsanto is active in the supply of seeds, bio-technology traits and herbicides in South Africa.
Both Bayer and Monsanto are also involved in research and development (R&D) for bio-technology traits and the discovery and development of active ingredients globally, which are critical inputs in the development of genetically modified (GM) seeds and agro-chemicals, respectively, the Commission said.
“The proposed merger results in the removal of potential competition as it removes the opportunity for Bayer to independently enter into South Africa and compete against Monsanto, particularly in the development and production of traits for seeds and the accompanying herbicides used in a number of agricultural markets,” The Commission said.
In addition, there are also several structural factors in this seed industry which are conducive for coordinated conduct which would be enhanced by the proposed merger through the prevalence of cross licensing agreements.
There are also several structural factors in this seed industry which are conducive for coordinated conduct which would be enhanced by the proposed merger through the prevalence of cross licensing agreements.
In order to remedy all the identified concerns, the Commission has therefore imposed conditions for the merged entity to divest and sell the entire global Liberty Link trait technology and the associated Liberty branded agro-chemicals business of Bayer.
The Commission has also imposed a condition that requires the potential buyer of the divested businesses to commercialise the divested products in South Africa, or alternatively, oblige the potential purchaser to license the divested business to a South African third party to commercialise anywhere in the world should the purchaser be unable to do so.
“Finally, the Commission identified public interest concerns specific to South Africa relating to employment and support for emerging farmers, that have been remedied,” according to the statement.
The Commission was officially notified of the merger on 1 February 2017 and approved the transaction on 3 May 2017. In terms of the Competition Act, the merger is defined as an intermediate merger, and therefore the Commission is obliged to make a decision within 60 business days from date of notification, which decision is final.
South Africa was first to be notified of this global transaction, it has also been or will be notified in several other jurisdictions including the United States, European Union, Brazil, Russia, China and India.Read Fin24's top stories trending on Twitter: Fin24’s top stories