EU Launches In-Depth Investigation Into Bayer-Monsanto $66 Billion Merger
The European Commission, the European Union's executive arm, announced Tuesday it has opened an in-depth investigation into Bayer's proposed $66 billion takeover of Monsanto over "concerns that the merger may reduce competition in areas such as pesticides, seeds and traits."
The controversial merger, if successful, will form the world's largest integrated seed and pesticide company.
"It would combine two competitors with leading portfolios in non-selective herbicides, seeds and traits, and digital agriculture," the commission stated. "Both companies are active in developing new products in these areas."
The commission warned that the acquisition could reduce competition in a number of different markets resulting in "higher prices, lower quality, less choice and less innovation."
The commission's initial market investigation identified three preliminary concerns, as follows:
Monsanto's pesticide product glyphosate is the most sold non-selective herbicide in Europe. Bayer produces glufosinate ammonium, also a non-selective herbicide and one of the very few alternatives to glyphosate. According to the commission's preliminary investigation, Monsanto and Bayer are two of a limited number of competitors in this field capable of discovering new active ingredients and developing new formulations, including addressing the growing problem of weed resistance to existing products.
In addition, the commission will further assess both Monsanto's activities in biological pesticide products that would compete with Bayer's existing portfolio of chemical pesticide products, and the parties' overlapping activities in products that tackle varroa mites, a parasite affecting bee colonies in Europe.
Bayer and Monsanto are both active in the breeding of vegetable seeds. The commission's initial investigation shows that the parties have high combined market shares in a number of these vegetable seeds markets, and that some of their products compete directly with each other.
Bayer and Monsanto are also active in the breeding and licensing of seeds for several field crops. Monsanto has the highest market share in oilseed rape seeds in Europe. Bayer, with the highest market share in oilseed rape seeds at global level, is one of the few players with the means to compete intensively in this market. Furthermore, both parties are important licensors of cotton seeds to their competitors in Europe, and both are investing in research and innovation programs for wheat.
A trait is a characteristic of a plant, such as height, herbicide tolerance and insect or disease resistance, and can be developed in laboratories and introduced in certain plant varieties.
The commission's preliminary investigation indicates that Monsanto has a dominant position in several traits markets worldwide. Bayer is one of the few competitors to Monsanto in certain traits markets, and has notably developed alternative herbicide tolerance traits to Monsanto's. The commission will investigate in particular whether the transaction could lead to a reduction of competition in these markets, taking into account the existing links between the few worldwide competitors through cross-licensing and through research and development cooperations.
"Moreover," the commission noted, "the transaction would take place in industries that are already globally concentrated, as illustrated by the recent mergers of Dow and Dupont and Syngenta and ChemChina, in which the commission intervened to protect competition for the benefit of farmers and consumers."
Bayer and Monsanto submitted commitments in late July to address some of the commission's preliminary concerns. However, the commission "considered these commitments insufficient to clearly dismiss its serious doubts as to the transaction's compatibility with the EU Merger Regulation."
Margrethe Vestager, who serves as European Commissioner for Competition, said that "seeds and pesticide products are essential for farmers and ultimately consumers."
"We need to ensure effective competition so that farmers can have access to innovative products, better quality and also purchase products at competitive prices. And at the same time maintain an environment where companies can innovate and invest in improved products," Vestager added.
The German pharmaceuticals company told Reuters it is still aiming to have the transaction approved by the end of the year.
"Bayer looks forward to continuing to work constructively with the commission with a view to obtaining the commission's approval," the company said.
The commission could block the Monsanto-Bayer deal but it has approved both Dow and DuPont's deal as well as ChemChina's takeover of Syngenta after major concessions, Reuters reported. The commission has until January to make a decision.
Bayer and Monsanto bosses tout the mega-deal as an altruistic plan to improve "the lives of growers and people around the world."
Hannah Lownsbrough, the executive director of the consumer group SumOfUs, wrote in the Guardian: "If approved, the merger would be an extremely risky consolidation of corporate power, not to mention a serious threat to food supplies and farmers around the world. It is essential that regulators properly investigate it and take decisive action before it's too late."
California is bracing for rare January wildfires this week amid damaging Santa Ana winds coupled with unusually hot and dry winter weather.
High winds, gusting up to 80- to 90 miles per hour in some parts of the state, are expected to last through Wednesday evening. Nearly the entire state has been in a drought for months, according to the U.S. Drought Monitor, which, alongside summerlike temperatures, has left vegetation dry and flammable.
Utilities Southern California Edison and PG&E, which serves the central and northern portions of the state, warned it may preemptively shut off power to hundreds of thousands of customers to reduce the risk of electrical fires sparked by trees and branches falling on live power lines. The rare January fire conditions come on the heels of the worst wildfire season ever recorded in California, as climate change exacerbates the factors causing fires to be more frequent and severe.
California is also experiencing the most severe surge of COVID-19 cases since the beginning of the pandemic, with hospitals and ICUs over capacity and a stay-at-home order in place. Wildfire smoke can increase the risk of adverse health effects due to COVID, and evacuations forcing people to crowd into shelters could further spread the virus.
As reported by AccuWeather:
In the atmosphere, air flows from high to low pressure. The setup into Wednesday is like having two giant atmospheric fans working as a team with one pulling and the other pushing the air in the same direction.
Normally, mountains to the north and east of Los Angeles would protect the downtown which sits in a basin. However, with the assistance of the offshore storm, there will be areas of gusty winds even in the L.A. Basin. The winds may get strong enough in parts of the basin to break tree limbs and lead to sporadic power outages and sparks that could ignite fires.
"Typically, Santa Ana winds stay out of downtown Los Angeles and the L.A. Basin, but this time, conditions may set up just right to bring 30- to 40-mph wind gusts even in those typically calm condition areas," said AccuWeather Senior Meteorologist Mike Doll.
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