Bayer's acquisition of the agrochemicals unit of Aventis is expected to be approved by European antitrust authorities - but only after the companies agreed to substantial disposals.
The E.U.'s antitrust authority has delayed its decision on Bayer AG's (BAY) $7.3 billion (Euros) acquisition of Aventis SA's (AVE) agrochemical unit by one week to April 17, a European Union (EU) spokesman said Friday. "We aren't ready yet and there are ongoing contacts with the companies," said Michael Tscherny, an E.U. Commission spokesman. He didn't explain why a postponement was necessary.
Previously, Tscherny had said the decision would likely have been made next Tuesday. By law, Brussels has until April 22.
People close to the case say the European Commission is set to clear the deal within weeks after five months of tough scrutiny that prompted Bayer to offer to dispose of important parts of the combined group with sales of more than $150 million Euros.
The German company is understood to have agreed to sell the U.S. and European rights to fipronil, an Aventis insecticide considered by analysts as the jewel in the crown of the group's agrochemicals unit.
In addition, the companies may be prepared to part with imidacloprid, an insecticide chemical produced by Bayer. The two disposals account for annual sales of more than $150 million Euros, although it's not clear if the company would sell both fipronil and imidacloprid.
Analysts believe that BASF, Bayer's German rival, which was outbid for Aventis Crop Science, is the front-runner to buy the products to be sold. The extent of the disposals may surprise some industry experts because Manfred Schneider, Bayer's outgoing chairman, said last year the company might not have to sell assets to win regulatory approval.
The proposed sales will be a blow for Bayer but highlight its willingness to complete the acquisition of high-margin agrochemicals at a time of sluggish growth in its core pharmaceuticals business.
The Aventis deal – Bayer's biggest acquisition – will more than double the German company's agrochemicals sales to about $8 billion Euros and lift it from sixth to second place in the global crop protection industry, just behind Syngenta.
Bayer's offer of disposals is believed to have convinced the Commission's competition department to clear the deal. The decision still needs to be discussed with an advisory committee of the EU’s 15 member states and the 20 commissioners. However, both the member states and the commissioners usually endorse the opinion of their competition experts.
U.S. competition authorities are also scrutinizing the deal. People close to the discussions said the two regulators had cooperated closely on the Bayer-Aventis deal - a sign that the U.S. watchdogs could also clear the deal.
Bayer and the Commission declined to comment.
Fipronil is one of Aventis' newest and fastest growing products, with total sales of $302 million Euros last year, expected to grow to $500 million Euros in the next few years.
Bayer is understood to have offered to divest the U.S. and European crop protection rights to Fipronil, which account for about half of the insecticide's sales. The company will retain an option to license back the rights for Fipronil's crop protection uses outside Europe and the U.S. and for non-agrochemicals uses. It will only sell the rights for crop protection, keeping other applications.