The European Commission announced March 21 that it has conditionally approved Bayer’s proposed acquisition of Monsanto, marking a significant step forward in the progress to close the transaction.

The commission said it has "decided to give conditional approval to Bayer's plans to buy Monsanto" under European Union merger rules. “We were able to do so because of the significant remedies the companies offered, which met our competition concerns in full.”

The commission said its investigation into the merger raised concerns that the transaction, as notified, would have significantly reduced competition and innovation in a number of markets in Europe and globally.

In response to the concerns, Bayer and Monsanto submitted a remedy package worth well over 6 billion euros that the European Commission said removes all problematic overlaps between the parties' activities. Additionally, it ensures that the number of global players actively competing and innovating in seeds and pesticides will remain the same before and after the merger.

“Receipt of the European Commission’s approval is a major success and a significant milestone,” Bayer chief executive officer Werner Baumann said. “Together with Monsanto, we want to help farmers across the world grow more nutritious food in a more sustainable way that benefits both consumers and the environment.”

The conditions cover, in particular, the divestment of certain Bayer businesses, including the global field crop seeds business for canola, cotton and soybeans (with minor exceptions restricted to the Asia region), the research and development platform for hybrid wheat, the global vegetable seeds business, the global glufosinate ammonium business as well as certain glyphosate-based herbicides in Europe predominantly for industrial use.

In addition, the European Commission is requiring Monsanto to divest its global business with the nematicide NemaStrike, The conditions also stipulate the transfer of three Bayer research projects in the area of non-selective herbicides and the granting of a license to Bayer’s digital farming portfolio.

“Our decision requires Bayer to sell this package to a suitable purchaser. Bayer has chosen BASF,” the commission stated. “BASF is not currently active in seeds markets. It also does not sell a herbicide in Europe that competes with glyphosate.”

At first glance, the commission said BASF seems to have the potential to suitably replace Bayer's competition. However, it said it will now carefully review whether BASF indeed meets all the purchaser requirements and whether the terms of the sale are in line with Bayer's commitments. This includes looking at whether new or existing links between BASF and the parties would negatively affect BASF's ability or incentives to compete.

“This is a complex task, also given the size of the remedy package,” the European Commission said, adding that it is separately assessing whether the sale to BASF itself raises any competition concerns. The current deadline for this decision is April 16.

“Bayer will only be allowed to implement the takeover of Monsanto after the commission has assessed and approved the sale of the remedy package to BASF,” it added.

The transaction remains subject to customary closing conditions, including receipt of required regulatory approvals. Bayer and Monsanto are working closely with authorities – including the U.S. Department of Justice – with the goal of closing the transaction in the second quarter of 2018.

Bayer has now received approvals for the transaction from substantially more than half of the some 30 regulatory authorities, including those in Brazil and China.