European Commission freezes Bayer’s merger with Monsanto

OLIVER BERG

A file picture dated 02 March 2007 showing the factories of German chemical and pharmaceutical company Bayer in Leverkusen, Germany.

The deal will be delayed at least until January 2018


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The European Commission announced on Tuesday that it has launched an investigation on Bayer’s intended takeover of Monsanto.

Competition Commissioner Margrethe Vestager has expressed concerns that the proposed €56bn takeover will give rise to an oligopoly in the farming industry, rising costs for farmers and consumers. The Commission will announce the result of its investigation by January 8, 2018, Il Sole24 reports.

Monsanto has a bad reputation in Europe, both because of its role in the development and promotion of genetically engineered seeds – arguably increasing bio-dependency of states – but also for the use of controversial glyphosates.

The deal was sealed in September 2016, allowing Bayer to emerge as the dominant market player in the wholesale of both pesticides and seeds, making the company a one-stop shop. At the time, analysts projected a 50-50% chance of gaining regulatory clearance for the takeover.

Farmers lobby groups in Europe and the United States are concerned that market consolidation in the supply industry will mean increased costs. And US authorities are not likely to welcome the move of Monsanto’s head of operations in Europe.

Not everyone in the German company was enthusiastic about the deal. Should Bayer fail to clear the takeover with regulatory authorities, they will have to pay Monsanto a “breakup” fee of $2bn. Moreover, some of Bayern’s shareholders are skeptical as the company’s focus will shift from pharmaceuticals to the agro-business.

In a hearing of the two companies management in Brussels on July 31, the company argued that consolidation is necessary to fund research and innovation that will increase food production. Market analysts also suggest the merger would also boost the use of big data in agriculture.

The European Commission fears innovation may, in fact, be stifled, especially in areas such as plant development, including height, disease and herbicide tolerance. Moreover, if the agreement does go through, it will be the first of its kind, but not necessarily the last. Dow Chemical and Du Pont are next in line for a merger, if there is a precedent.

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