Merger Arbitrage Blog

Statement of Approval by CADE for Syngenta/ChemChina Merger

CADE had unconditionally approved the transaction on 24th Feb 2017, about 1 month after the last comments came in on 24 Jan 2017. Below is the translated comments:

10. It is noted that the Applicants are very different profile companies with regard to the market performance of products for crop protection and non-agricultural environments. Syngenta has an innovative profile and invests significant part of its resources in the research and development of new molecules, while maintaining and improving products based on its older molecules. Adama, in turn, develops products formulated from active ingredients that are already in the public domain. From this perspective, the present operation does not represent the union of two particularly close competitors – a finding that, in itself, does not dispense with the analysis of specific overlaps between the activities of the Applicants.
11. The operation generates overlap in several markets for insecticides, fungicides and herbicides, as well as products used in seed treatment and post-harvest treatment in different crops of economic importance; As well as formulated non-agricultural products applied in forests and urban environments to control pests and vectors of diseases. Most of the markets where these overlaps have been observed, the concentration generated is small (below 20%), and in many other cases it is not considerable (between 20% and 30%). Even in cases where the overlap was more important (above 30%), there are several competitors with an effective capacity to compete with the Claimants and to contain any attempt to exercise market power after the transaction. Thus, although entry into these markets is untimely, mainly due to issues inherent to the regulatory process, competitive concerns can be ruled out by the criterion of rivalry.
12. No competitive concerns have been identified as a result of the vertical relationships arising or reinforced by the operation.
13. Finally, the statements obtained by third parties officially indicate that the operation gives the Requesters an increase in the portfolio that can allow the company to act in a more aggressive way granting greater commercial advantages and, consequently, conquering more space with certain distributors. Still, a relevant part of the distributors says it would not tend to concentrate its purchases on Adama and Syngenta, even after the operation. If the acquisition of more space with distributors is due to the concession of better discounts, other more advantageous commercial conditions or the reduction of transaction costs, and considering the presence of other competitors capable of effectively competing (with portfolio Competitive), there is no need to talk about competitive concern. Different would be the case in which a dominant company began to expand its presence, not based on a more efficient performance, but on anti-competitive restrictions – such as certain cases of exclusivity or married sale – that would artificially hamper the establishment of rivals. In this case, it would fit analysis in a specific process of pipeline control.
14. In view of the above, it is recommended that approval be granted without restriction.

15. Unconditional approval.

Updated: February 28, 2017 — 2:03 am

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