The Commerce Commission has granted clearance for Elanco to acquire Bayer’s animal health business, subject to a divestment undertaking requiring Elanco to divest three brands: Maggo, Zapp Encore, and Osurnia.
Elanco applied to the Commission for clearance to acquire Bayer AG’s animal health business in February 2020 as part of a global transaction.
In making its decision, the Commission focused on the potential impact of the proposed acquisition on competition in the markets for the supply of products for the treatment and prevention of external parasites on sheep, as well as the market for the supply of products for the treatment of otitis in dog.
“We consider that the combination of the two most prominent suppliers of products for the treatment and prevention of external parasites on sheep in New Zealand would be likely to result in a substantial lessening of competition, with customers having limited alternatives post-acquisition,” said Commission Deputy Chair Sue Begg.
“However, we consider the divestment of both Maggo and Zapp Encore by Elanco is sufficient to remedy the competitive harm in these markets.”
Regarding treatment of otitis in dogs, Ms Begg said that Bayer is likely to introduce a new otitis treatment called Neptra into New Zealand and this is likely to compete strongly with Elanco’s long acting otitis treatment, Osurnia.
“The proposed acquisition would remove that competition, said Ms Begg.
“Requiring Elanco to divest Osurnia means that customers will continue to have a number of alternatives for the treatment of otitis in dogs.”
To comply with the undertaking, Elanco will divest all the necessary assets and licenses to supply Maggo, Zapp Encore and Osurnia in New Zealand. Any purchaser will need to be approved by the Commission.
A public version of the written reasons for the decision will be available on the Commission’s case register in the near future.
Elanco is a US-based global animal healthcare company that develops, manufactures and distributes healthcare treatments for a range of different companion animals (such as cats and dogs) and production animals (such as sheep, cattle and other ruminants).
Bayer Animal Health also develops, manufactures and distributes healthcare treatments for a range of different companion and production animals on a global basis.
The Commerce Commission previously granted clearance to Dechra Pharmaceuticals PLC to acquire the assets, rights and liabilities relating to Osurnia from Elanco.
Merger clearance process
When considering a proposed merger, the Commission must determine whether any competition that would be lost with the merger would be substantial. Where a merger is likely to substantially lessen competition in a market, the acquiring company may undertake to divest certain assets.
If we consider the proposed divestment undertaking will remedy the likely substantial lessening of competition, we will clear the merger. For a divestment undertaking to remedy competition concerns, we must be satisfied that the divestment will result in sufficient additional competitive constraint on the merged firm so that a substantial lessening of competition is no longer likely. A fact sheet explaining how the Commission assesses a merger application is available on our website.