AUSTRALIA’S competition regulator is seeking market feedback on the sheep lice and pet worm control product implications of Elanco’s proposed acquisition of Bayer’s animal health business.

Elanco has entered into an agreement with Bayer AG in a transaction valued at US$7.6 billion (A11.45 bn) that would make it the world’s second largest animal health company.

The Australian Competition and Consumer Commission is seeking views on a divestment undertaking offered by Elanco that would require it to sell Bayer’s Drontal, Profender and Droncit worming brands, and the company’s Avenge+Fly sheep lice brand to a purchaser or purchasers approved by the regulator.

The ACCC has preliminary competition concerns in relation to the transaction’s consolidation of sheep lice products, and of worming treatments commonly used for cats and dogs.

Elanco has said it will sell Bayer’s Avenge+Fly if it can buy Bayer AG.

Bayer’s sheep lice products include Avenge, Piranha and Viper. These products compete with Elanco’s Extinosad sheep lice product. The acquisition would also combine ownership of Elanco’s Milbemax and, Interceptor brands with Bayer’s Drontal, Profender and Droncit brands.

ACCC deputy chair Mick Keogh said the release of the proposed divestment undertaking for public comment should not be interpreted as a signal that the ACCC will ultimately accept the undertaking and clear the transaction.

“We are following our usual practice of publicly consulting on a proposed divestment package.

“We are seeking feedback from industry participants on whether the divestment package will be sufficient to address any competition concerns arising from the proposed acquisition,” Mr Keogh said.

The ACCC is seeking views from market participants on whether the proposed undertaking would be likely to alleviate competition concerns in sheep lice treatments, and intestinal worming treatments for companion animals. Submission will be received until 10 June 2020.

In particular, the ACCC is seeking views on:
• whether Elanco and BAH compete closely in the manufacture and supply of external parasite and internal parasite products for companion animals, cattle,
sheep and poultry;
• whether Elanco and BAH compete closely in the manufacture and supply of otitis treatments for companion animals;
• whether Elanco and BAH compete closely in the manufacture or supply of any other products, and;
• the impact on price, innovation and services levels if the proposed acquisition proceeds.

In a letter to interested parties, the ACCC’s general manager of the mergers and authorisation review division Sharon Deano said The ACCC has has not yet formed a concluded view as to whether its competition concerns are capable of being addressed by the proposed undertaking or any other possible remedy. The commission has said it may require changes to the proposed undertaking depending on the nature and extent of any concerns raised during the market consultation process.

“The ACCC will only accept the proposed undertaking if it is satisfied that the proposed undertaking will sufficiently address its competition concerns, and after consideration of the monitoring and compliance costs and any risk to competition associated with the implementation of the proposed undertaking (or failure to do so).”

Both Bayer and Elanco sell a wide range of animal health products in Australia, including cattle tick prevention products and various parasiticides for companion and production animals. Bayer and Elanco do not have any manufacturing or R&D facilities based in Australia.

Read Elanco draft undertaking details here.

Read the ACCC market inquiries letter here.

More information is available on the ACCC website here.