Regulation Authorities Delay Bayer-Monsanto Deal (Audio)

tenor of negotiations so far. Joining us as Jennifer Ree, senior litigation analyst for Bloomberg Intelligence, jen what are the concerns were the merger like this in the midst of an unprecedented wave of consolidation in the agro chemicals industry. Well, I mean you just said it. That's the first thing.

You have a lot of consolidation in the industry, and of course this is more and both in the US and and the U, there are concerns about farmers, which are the primary customers of all of these companies down DuPont that just merged now Buyer Monsanto, as well as KEM,

China and Cygenda. So you know, what the EU is concerned about are some overlaps between these two companies, Buyer and Montanto in a couple different kinds of pesticides UM as well as in some seats UM, as well as the possibility that this combined company could bundle these products, both of which are sold to farmers, and there could be some harm that could come out of that ability. So Jen, what is Buyer going to do with this extra time, as it were, this delay in the takeover?

You know, I suspect and this is obviously just speculation that what is happening is that they are working now on negotiating remedies that they will have to agree to with the EU in order to be able to close their deal, and that they are they've decided that it's worth it to them to have a little extra time to try to make some arguments to limit what the

European regulators require them to sell off. And it's clear they're going to have to sell assets, and they may be simply trying to limit what it is they have to sell there. And while they're discussing remedies with the regulators, they're also holding talks with potential acquirers about some assets that they may need to divest. It doesn't seem pretty certain that the EU is going to require some substantial divestments. Oh,

I think so absolutely. You know, when they go into a phase two, and then in particular, we know that some assets were offered up early on during the Phase one by Buyer in in the European Commission rejected that package. So we do know that they expect investitures, and I

think it will be extensive. They did require down and do Pont to divest assets um not seeds, but several assets in the pesticide area, as well as Keim China and Cententa to divest some chemicals in order to close and I think we should expect that plus seeds and maybe more. Here jen Uh Buyer is, you know, seeking clearance from a lot of authorities around the globe who have oversight of this kind of deal and various different

countries all over the world. If they get the EU on board with whatever divestment they have to make, will everything else fall into place or are they going to have to deal similarly with other authorities? You know, it's a good question. That is what usually happens, and that's generally what happened in the Dow DuPont deal because in that case, the European regulators required global divestitures by the company, not not just divestitures that would have sold assets sold

within the European Union. So depending on what the EU asks for here, if it's again this global remedy so that it will cure concerns of other regulators, things might just fall into place without any other regulators asking for much more. But if not, other regulators could you know, ask for certain smaller divestitures that might particularly affect the

cut consumers in their region. Buyer has sought clearance from almost all of the roughly thirty authorities who have oversight of the deal, and has received approvals from more than one third of them. Does that seem low to you when Buyer had previously said it expected to get approvals to complete the transaction by the end of the year, You know, it does actually seem a little bit low.

But sometimes what happens is some of the jurisdictions will hang back and wait for sort of the the bigger jurisdictions, the more key jurisdictions like the US, China, Europe, to see what they're going to do in terms of the remedy. They know there will be a remedy here, and they want to hang back and see what that remedy is going to be, um to understand whether or not they might need something more to protect consumers in their regions.

So I think what's holding things up here is likely the EU, which is really dragging here, as well as the US. So jen assuming that uh, in fact, buyer does have to divest a number of different things, and they are in fact already talking, it sounds like to some of the some of the potential acquirers, what can we expect them to be vesting? What you know? Generally speaking, Well, we do know from a press release that was issued by the European Commission that there is a problem with

herbicides or beside is one kind of pesticide. The herbicides essentially kill weeds, and in this case, mont Santo has a product called Roundup and that overlaps with a product that's sold by buyer, So it's very likely in that area they're going to have divestitures. They also noted that is the European Commission noted that there were seed overlaps,

particularly in oil seed rape seeds. And we also know there's probably a problem with cotton seeds in the US because when mont Santo acquired a company called Delta and pine Land several years ago, they had to sell off Delta and pine Lands cotton assets and they sold it to Buyer. So at this point, there's no way that buyer is going to have to be able to, you know, combine those seeds again, those cotton seeds, so they'll likely

have to sell cotton seeds as well. Jen why this wave of consolidation in the agro chemical industry, Well, you know, it's likely that that's also a good question, and an industry analyst could probably tell you more. But one of the things we're seeing is that there is a lot of need for innovation and R and D to you know, to to meet rising demand, to deal with climate change things like that that affect crops and affect the growth

of crops and our food supply. And it takes a lot of money, a lot of capital, and and a lot of scale to conduct the kind of R and D that's needed. And that's exactly what Buyer and Monsanto is arguing here that in order to conduct the kind of innovation that they need to and R and d going forward, they're going to be able to do that much better off combined rather than individually. So can we expect that this is gonna keep happening as throughout the

entire industry? Well, we may be. We may see it continue to happen. I think one of the interesting things that that could happen here though, because I was reading an article today about B A. S F as one of the possible buyers of the assets to be divested by buyer in mont Santo, and the fact that the company may be interested in both seeds and chemicals, and B A. S F is a company that now has chemicals and not seeds, So actually that sort of adds

to diversification here. It's sort of is a lessening of consolidation if we add another combined seed chemical company into the mix, because now you'll have four sort of big combined seed chemical companies rather than three. We keep hearing about the EU and the Commissioner, Margaret the Stayer, is the EU seen as the toughest of the regulators? Well, you know, I think right now, yes, and I think

that the US was considered pretty tough too. But now we're in this transition stage and we still don't really know what's going to happen going forward with the anti trust agencies. Were still down three commissioners at the FTC. We still don't have the head of the Antitrust Division at the Department of Justice confirmed um appointed, but not confirmed, And so we don't know what the trend is going to be. But but most people think it's likely that going forward in the next few years, the EU will

be the toughest on antitrust. Always great to have you on. That's Jennifer Reaching, your litigation analyst for Bloomberg Intelligence. You can read more of Jennifer's analysis by going to be I go on the Bloomberg terminal