EUROPEAN COMMISSION DG Competition Case M.8851 – BASF / BAYER DIVESTMENT BUSINESS Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Decision on the implementation of the commitments - Purchaser approval Date: 07/11/2018 EUROPEAN COMMISSION Brussels, 07.11.2018 C(2018) 7488 final PUBLIC VERSION In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. To the notifying party Dear Sir/Madam, Subject: Case M.8851 – BASF / Bayer Divestment Business Approval of Syngenta Crop Protection AG as purchaser of the [NSH line of research 1 remedy package], following your letter of 13 September 2018 and the Trustee’s opinion of 18 October 2018 FACTS AND PROCEDURE 1. By decision of 30 April 2018 (the "Decision") pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings1 (the "Merger Regulation"), the Commission declared the acquisition of assets of Bayer Aktiengesellschaft (the "Bayer Divestment Business") by BASF SE ("BASF") compatible with the internal market subject to full compliance with the commitments submitted by BASF, which were annexed to the Decision (the "Commitments"). 2. In particular, pursuant to the Decision, the Commitments provide that in order to address the serious doubts raised by the combination of BASF's and the Bayer Divestment Business' activities in certain nematicide markets as well as in weed management innovation, BASF would divest (i) its Trunemco nematicide (the "Trunemco Assets") as well as, separately, (ii) a package of data and intellectual 1 OJ L 24, 29.01.2004, p. 1. With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision. Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË Tel: +32 229-91111. Fax: +32 229-64301. E-mail: [email protected] property rights relating to [mode of action 1] class herbicide chemistry type [mode of action 1] inhibitors, as well as a material transfer agreement and an option to a non-exclusive development and commercial licence regarding BASF’s [mode of action 1] which would permit the Purchaser to develop a corresponding [mode of action 1] HT trait in […]. Only the commitment to divest the [NSH line of research 1 remedy package] is concerned by this decision. 3. Against this background, by letter of 27 August 2018, as revised on 13 September 2018, BASF informed the Commission of its intention of selling the [NSH line of research 1 remedy package] to Syngenta Crop Protection AG ("Syngenta" or the "Proposed Purchaser") (hereinafter the "Transaction") and asked the Commission to approve Syngenta as purchaser of the [NSH line of research 1 remedy package]. BASF also submitted the transaction documents signed on 22 August 2018 bringing about the Transaction, namely: (i) […], (ii) […] and (iii) […] (together the "Transaction Agreements"). 4. On 18 October 2018, the monitoring trustee supervising the implementation of the Commitments, Mazars (the "Trustee"), separately submitted an assessment of Syngenta’s suitability as a purchaser (the "Reasoned Opinion"). In particular, the Trustee indicated that Syngenta fulfils the criteria of the purchaser requirements in paragraph 19 of the Commitments. In this assessment, the Trustee also indicated that, on the basis of the Transaction Agreements, the [NSH line of research 1 remedy package] would be sold in a manner consistent with the Commitments. ASSESSMENT OF THE PROPOSAL Legal framework 5. Pursuant to paragraph 20 of the Commitments, the Commission has to verify that the Proposed Purchaser fulfils the purchaser criteria and that the [NSH line of research 1 remedy package] is being sold in a manner consistent with the Commitments. 6. According to paragraph 19 of the Commitments, in its assessment of the Proposed Purchaser, the Commission should ensure in particular that: a. The purchaser is independent from and unconnected to each of BASF and Bayer and their affiliated undertakings. b. The purchaser has the financial resources, proven expertise and incentives to maintain and develop the [NSH line of research 1 remedy package] as a viable and active competitive force in competition with BASF and other competitors. In particular, the purchaser should have the necessary research and development organisation, trait stacking capabilities, registration capabilities and international reach to be able to develop and, if successful, launch a [mode of action 1] inhibitor that is the subject of the [NSH line of research 1 remedy package]. c. The acquisition of the [NSH line of research 1 remedy package] by the purchaser must neither be likely to create, in light of the information available to the Commission, prima facie competition concerns nor give rise to a risk that the implementation of the Commitments will be delayed. In particular, the purchaser must reasonably be expected to obtain all necessary approvals from 2 the relevant regulatory authorities for the acquisition of the [NSH line of research 1 remedy package]. Description of the Proposed Purchaser 7. Syngenta is a Swiss company active on a vertically-integrated basis in the research, development, manufacture and marketing of a wide range of crop protection products and seeds. 8. With global sales of approximately EUR 11.2 billion, Syngenta is one of the largest agricultural company worldwide. 9. Since May 2017, the ultimate owner of Syngenta is China National Chemical Corporation (“ChemChina”), a Chinese chemical corporation. Independence from each of BASF and Bayer 10. Pursuant to paragraph 19 (a) of the Commitments, in order to be approved by the Commission, a suitable purchaser must be independent from and unconnected to each of BASF and Bayer and their affiliated undertakings. 11. According to the information provided by BASF and the Trustee, there are no cross-shareholdings or common shareholdings between either of BASF or Bayer and Syngenta, and Syngenta does not share any executive and non-executive directors with BASF or Bayer.2 12. Although there are some joint-ventures in which either of BASF or Bayer and Syngenta participate, the Trustee concluded that these links are not material, are common in the industry and do not to affect Syngenta’s independence.3 13. Syngenta can therefore be considered to be independent from and unconnected to each of BASF and Bayer in terms of ownership and investments. 14. Moreover, the Trustee considers that pre-existing commercial relationships or collaborations in place between either of BASF or Bayer and Syngenta4 should not impede Syngenta's independence from each of BASF and Bayer because they are not material to Syngenta and have been concluded in line with industry practice.5 15. On the basis of the information provided by BASF and taking into account the Reasoned Opinion submitted by the Trustee, the Commission concludes that Syngenta is, and will continue to be post-Transaction, independent and unconnected to each of BASF and Bayer and their respective affiliated undertakings. Financial resources, proven expertise and incentive to maintain and develop the Divested Business as a viable and active competitor 16. Pursuant to paragraph 19 (b) of the Commitments, in order to be approved by the Commission, a suitable purchaser must have the financial resources, proven 2 Reasoned Opinion, paragraphs 6(a), 6(c), 114 and 137. 3 Reasoned Opinion, paragraphs 6(a), 6(b) and 131. 4 Such agreements include […] and others (Reasoned Opinion, paragraphs 160-326). 5 Reasoned Opinion, paragraphs 6(d), 331 and 338. 3 expertise and the incentives to maintain and develop the [NSH line of research 1 remedy package] as a viable and active competitive force in competition with BASF and other competitors. In particular, the purchaser must have the necessary research and development organisation, trait stacking capabilities, registration capabilities and international reach to be able to develop and, if successful, launch a [mode of action 1] inhibitor that is the subject of the [NSH line of research 1 remedy package]. 17. Syngenta has significant financial resources. In 2017, it achieved total sales of approximately 11.2 billion with a gross profit of EUR 5.45 billion. This compares to a purchase price of […] plus a licence fee for the [NSH line of research 1 remedy package], and a royalty payment for the [mode of action 1] Gene Licence. 18. In terms of proven expertise, Syngenta is an established crop protection player with a long history and extensive expertise, notably in herbicide research and innovation, including in relation to [mode of action 1] inhibitors. The Trustee considers that Syngenta will be able to integrate the [NSH line of research 1 remedy package] within its existing portfolio. 19. In particular, the Trustee considers that Syngenta has the necessary research and development organisation, trait stacking capabilities, registration capabilities and international reach