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KEYCODE BAYER #51

December 5, 2001

EU announces 4-month probe of Bayer deal

The European Commission said yesterday it has opened an in-depth investigation of Bayer's proposal to purchase Aventis Cropscience (ACS) and become the world's second-largest maker of agrochemicals. "The Commission has concerns that competition may be significantly reduced in the fields of insecticides, herbicides, fungicides and seed treatment products for the agricultural sector," the Commission said, adding it was also concerned about chemicals used to control ticks and fleas on dogs and cats. A Bayer spokesman declined immediate comment, saying the company was waiting for official notification from Brussels.

The German chemicals and pharmaceuticals group had said this week in Duesseldorf it anticipated the investigation, but nonetheless expected to complete the 7.2 billion euro ($6.5 billion) purchase of the agrochemicals unit of Franco-German rival Aventis by the end of the first quarter.

The purchase of Aventis CropScience would put Bayer in second place behind Anglo-Swiss group Syngenta , the world's largest maker of agrochemicals. The Commission said it had focused in part on insecticides "particularly in view of the combination of Bayer and ACS's portfolio of products in two very successful new classes of chemical substances". Those substances are known as neonicotinoids. Bayer has the key product and ACS has another known as pyrazoles.

The Commission said there were also problems in herbicides for the protection of cereals, maize and sugar beets, fungicides for protecting grapes and seed treatment products for crops, and also pest control. The Commission said it also had concerns about two new chemical classes of substances for household insecticides and for small animal ectoparasiticides - used on cats and dogs. It said that ACS includes a crop protection business, an environmental science business, a seed business and a bioscience business that develops technologies to change traits of plants.

The Commission also took note of its cooperation in the case with the Federal Trade Commission in the United States and with the Canadian Competition Bureau. An in-depth probe lasts four months and gives the Commission a chance to talk extensively with competitors and customers. At the end of the four months the Commission may approve the transaction without conditions, or find that it harms competition. If the deal harms competition the Commission may require changes or reject it entirely.