Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC clears acquisitions of Sigma-Aldrich by Merck, (Jun 16, 2015)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) has approved under the European Union (EU) merger regulation the proposed acquisition of Sigma-Aldrich by Merck, the EC announced on June 15. The decision is conditional on the divestment of certain Sigma-Aldrich assets, including manufacturing assets in Germany, the rights to certain brands, and a sales force. The Commission was notified of the transaction in April 2015.

Both companies are active worldwide in the life science sector. Merck, based in Germany, is a pharmaceutical and chemical company. Its Merck Millipore division focuses on developing, producing, and selling tools and products for the life sciences industry. Merck operates in 66 countries worldwide, generates an annual turnover of more than € 10 billion, and has approximately 38,000 employees.

Sigma-Aldrich is a US-based company active in the development, production and sale of life science tools and services as well as chemicals, analytical reagents, and products for laboratories. Sigma-Aldrich has operations in 37 countries worldwide, generates an annual turnover of more than € 2 billion, and employs approximately 9,000 people.

The Commission had concerns that the merged entity would have faced insufficient competitive pressure from the remaining players in the markets for certain laboratory chemicals, with a risk of price rises. It focused its investigation on the main product areas where Merck and Sigma-Aldrich currently compete, namely bioscience products, raw materials for pharmaceutical production, and laboratory chemicals.

The investigation showed that the two companies' activities are largely complementary with regard to bioscience products and raw materials for pharmaceutical production and that a number of important competitors will remain active on these markets after the takeover, including multinational companies such as Thermo Fisher and Avantor.

However, the Commission's investigation revealed some concerns for certain laboratory chemicals. In particular, the investigation showed that concerns could arise in the markets for solvents and inorganics used in laboratories by companies and research centers. This is because for these products Merck and Sigma-Aldrich: (1) are the two leading suppliers in Europe; (2) have two of the broadest product portfolios, which include high quality products and well-recognized brands; and (3) have efficient channels to reach customers, in a market that is characterized by a fragmented customer base. The combination of all these elements would have led to the loss of an important competitive force in the supply of solvents and inorganics following the merger.

In order to address the EC's competition concerns, the two companies offered a comprehensive remedies package, covering all the main steps in the manufacture, supply, and distribution of these products. In particular, the commitments include: (1) divestment of Sigma's manufacturing assets in Seelze, Germany, where most of the solvents and inorganics sold by Sigma in Europe are manufactured; (2) divestment of brands and trademarks such as Fluka, Riedel-de-Haen and Hydranal on a worldwide basis; (3) granting a temporary license to the Sigma-Aldrich brand for the supply of solvents and inorganics in the European Economic Area; and (4) transfer of customer information and a solution to ensure a temporary channel to the market.

Following an extensive market test with customers and competitors of Merck and Sigma-Aldrich, the companies offered improvements to their initial proposal. In light of the market test, the Commission found that the improved commitments address the identified competition concerns and concluded that the proposed transaction, as modified by the commitments, would raise no competition concerns.

Companies: Sigma-Aldrich Corporation; Merck KGaA

News: AcquisitionsMergers Antitrust