While Bayer’s $57 billion deal to acquire Monsanto has received regulatory approvals in most of the world, it has not in the European Union. EU competition law is, in general, stricter than U.S. law. There are also huge differences, especially now, in willingness to enforce existing competition laws in Europe versus the U.S.
An active campaign to block the Bayer-Monsanto “Advancing Together” deal has been underway in the EU for over a year. A team of academics at University College London has added fuel to the fire with a recent report that concludes the acquisition is unlawful because it would stifle competition, impose major new barriers to entry for new players in the seed and crop protection businesses, and lock the EU into a -seed-plus-pesticides future.
“An Unholy alliance: study lays down law to block major merger” appeared October 18, 2017 in New Food and provides a summary of the major issues that EU competition authorities are struggling with.
Both the politics and economics of the merger are highly dynamic. Clearly within the EU, Bayer’s home country Germany has the most at stake in the merger. Germany is also the country expected to play a key, if not decisive, role in the ongoing EU review of Monsanto’s main product – Roundup (glyphosate) herbicide. Already, France and Italy have announced their opposition to re-registration of glyphosate-based herbicides in the EU.
It is hard to imagine glyphosate gaining unfettered re-registration in the EU. At best, it will receive a time-limited approval (otherwise known as a phase out), with a long list of immediate restrictions (e.g. no more pre-harvest, desiccation uses).
Plus, the science continues to mount suggesting that occupational exposures to , glyphosate-based herbicides around the world have increased cancer risk, contributed to chronic kidney disease, and can trigger reproductive problems and birth defects.
The flood of legal cases over Roundup use and exposure and Non-Hodgkin lymphoma (NHL) will pass a major milestone early in 2018 when the judge hearing the lead case issues his ruling on causality (i.e., whether science supports a plausible link between Roundup and NHL).
From Bayer’s point of view, the economics of the deal are increasingly shaky. When the agreement was announced in 2016, the debacle over widespread planting of dicamba-resistant seeds seeds in the U.S. had not yet occurred. Monsanto was telling investors – and Bayer – that within about five years, dicamba would be the number two herbicide in the world by sales (behind Roundup), and that the company was going to move the dicamba-resistance gene into its global soybean, cotton, and corn seed platforms.
Clearly, the huge, projected growth in revenue and profits from dicamba-resistant crops, and dicamba herbicide sales, was a major factor driving upward Bayer’s willingness to pay for Monsanto. Fast forward to today and the dicamba-resistant seed platform is in huge trouble, and the liability exposure in the U.S. will take a big bite out of the projected net revenue stream.
The ongoing competition review in the EU is bound to extend well into 2018. So, there are three, major wildcards – whether and under what terms the EU re-registers glyphosate-based herbicides, restrictions imposed by U.S. state regulators (for details, see Dicamba Watch) on the planting of dicamba-resistant seeds, and the judge’s decision whether there is a plausible linkage between use of, and exposures to glyphosate-based herbicides and Non-Hodgkin lymphoma.
When the EU competition decision is finally announced, the Bayer board and management will surely take stock of their earlier assessment of the economics of the deal. If all three of the above wildcards go against Monsanto, the extended competition review in the EU may come to be viewed as a blessing in disguise.
George Smith, “An Unholy alliance: study lays down law to block major merger,” New Food, October 18, 2017.