South Africa’s competition commission has conditionally approved Bayer’s plan to acquire Monsanto, thus becoming the first antitrust authority to do so. It will require divestments, however, due to competition concerns in the market for GM cotton seeds, where it said the merger would create a monopoly.

The combination of the two agrochemicals giants would also hinder potential competition as it would remove the opportunity for Bayer to independently enter South Africa and compete against Monsanto, the Commission said. This, it added, applies particularly to the development and production of traits for seeds and the accompanying herbicides used in a number of agricultural markets. The regulatory authority also pointed to a problem that could arise from cross-licensing agreements.

To remedy all the identified concerns, the Commission has mandated that the merged company divest Bayer’s entire global Liberty Link trait technology and the associated Liberty-branded agrochemicals business.

Bayer’s crop protection business in South Africa sells fungicides, insecticides, herbicides and seed treatment products among others. Monsanto is active in the supply of seeds, biotechnology traits and herbicides. Both companies are engaged in research and development of biotechnology traits and the discovery and development of active ingredients for genetically modified (GM) seeds and agrochemicals.

The South African regulatory body is also requiring the potential buyer of the divested businesses to commercialize the products in the country or alternatively, oblige the potential purchaser to license the divested business to a South African third party.

The Commission noted that South Africa was first to be notified of this global transaction. Approvals are still pending or the plans have not yet been filed in several other jurisdictions, including the US, EU, Brazil, Russia, China and India. Beyond market considerations, the authority has mandated that the merged entity be required to maintain the existing employment levels of the two companies over a period of three years.