The European Commission has recently cleared two major agrochemical mergers – both following in-depth Phase II investigations:
(i) On 27 March 2017 the Commission conditionally cleared the proposed merger of Dow and DuPont, subject to the divestment of a substantial part of DuPont’s existing pesticides business and its global research and development (R&D) activities (as well as the divestment of certain assets in Dow’s petrochemical business). The Commission is satisfied that the remedies remove the market overlaps between the parties and will ensure innovation competition, which is particularly important in the pesticides market where R&D is essential to develop safer and more efficient products. DuPont has since announced its intention sell its divestment business to FMC Corporation.
(ii) On 5 April 2017 the Commission conditionally approved the proposed acquisition of Syngenta by ChemChina. Syngenta is a global leader in pesticides; Chinese State-owned ChemChina owns Adama, the largest producer of generic pesticides worldwide. The approval is conditional on ChemChina divesting significant parts of its European pesticides and plant-growth regulator business, including Adama’s products under development. The Commission was concerned that the proposed acquisition would reduce competition in a number of existing pesticides markets and in the plant growth regulator markets (used to stimulate or slow down plant growth). The Commission is satisfied that the remedies offered by ChemChina fully address its competition concerns and that a purchaser of the divestment business will be able to compete sustainably with the parties in the European pesticides and plant-growth markets.
The Commission assesses parallel transactions according to the ‘priority rule’, i.e. on a first come, first served basis. As the Dow/DuPont merger was notified three months before the ChemChina/Syngenta acquisition, the Commission’s assessment of certain markets in the ChemChina/Syngenta transaction was made on the assumption that the Dow/DuPont merger had taken place.
The Commission’s competition concerns in Dow/DuPont were focused on innovation and R&D activities, as the parties are two of the five key players (the other three being Bayer, BASF and Syngenta) active globally in pesticides R&D. Innovation was not a concern of the Commission in its assessment of ChemChina/Syngenta, as ChemChina’s subsidiary Adama does not develop its own active ingredients for pesticides but rather produces generic pesticides based on existing active ingredients that are no longer covered by patents.
A third major agrochemical transaction, Bayer’s proposed acquisition of Monsanto (announced on 14 September 2016) is currently being reviewed by several competition authorities worldwide, and is expected to be formally notified to the Commission in the near future.