Bayer’s proposed acquisition of Aventis Crop Science cleared one of its last, and possibly its most significant, potential obstacles when the U.S. Federal Trade Commission (FTC) approved the deal on May 31.
While there was little concern that the deal would get rejected, parties for both companies expressed uncertainty as to which lawn care and/or pest control products the companies would be forced to sell off to avoid market dominance. The most significant chemistry addressed by the FTC’s ruling is fipronil, the new insecticide that Aventis brought to the market last year as the active ingredient in the fire ant product Chipco TopChoice and the termiticide Termidor.
Bayer must sell fipronil and the intellectual property associated with it by the end of 2002, but the FTC will allow Bayer to “license back any intellectual property included in the fipronil assets for non-agricultural use to increase competition in these markets by enabling Bayer and the fipronil acquirer to bring fipronil products to the market. In addition, the order would allow Bayer to enter into a supply agreement with the acquirer of these assets for two years (with the possibility for extension), which would allow the acquirer to supply intermediate products to Bayer until the patents on these products expire, so that Bayer may use these intermediates to develop its own competing non-agricultural products.”
Ironically, Bayer has to sell off this chemistry because the companies were too successful creating popular and effective insecticides. “The new generation products are designed to kill undesirable insects, but are less harmful to human health and the environment than earlier products,” explained an FTC announcement. “These products are based on new generation active ingredients, of which the most important are Bayer's imidacloprid, Aventis’ fipronil, and Syngenta's thiamethoxam.
“The importance of such new generation active ingredients and products is increasing, as the Environmental Protection Agency removes older insecticides from the market because of their effects on human health and the environment. Therefore, new generation insecticide products are displacing older insecticide products in the marketplace.
“Further, Bayer and Aventis are two of the only three firms currently competing significantly in the market for such products, with only one other company, Syngenta, producing these insecticides. Bayer and Aventis are the only firms that have developed and successfully sold such products for veterinarian use in controlling fleas, and for non-repellent liquid termite control.”
Because Bayer and Aventis have such strong positions with imidacloprid (commonly known in the turf market as Merit and in the pest control market as Premise), the FTC wants them to sell fipronil to create another competitor for themselves. If they don’t sell fipronil, the FTC fears that Bayer’s acquisition of Aventis “would result in the elimination of both actual and potential competition in these markets, increased barriers to entry, reduced innovation competition for certain products, an increased possibility of coordinated interaction between competitors, and a substantial increase in market concentration.”
Emil Lansu, executive vice president, Bayer Corp., Kansas City, Mo., explained that "the formation of Bayer CropScience will create one of the leading world-wide crop science companies with an extensive portfolio of turf and ornamental and professional pest management products, as well as a broad range of crop protection products, a key position in the field of biotechnology and a developing presence in the seed business."
The author is Editor of Lawn & Landscape magazine and can be reached at bwest@lawnandlandscape.com.