Commission Clears DSM's Acquisition of the Vitamins and Fine Chemicals Division of Roche

Brussels, 23 July 2003

The European Commission has cleared the proposed acquisition of the Vitamins and Fine Chemicals division of Swiss company Roche by Dutch-based company DSM after a detailed investigation. The Commission had identified competition concerns in one market for feed enzymes, which are animal feed additives. DSM submitted a package of undertakings aimed at terminating its alliance with German fine chemicals company, BASF, for the production and distribution of feed enzymes and transferring its activities in the production of feed enzymes to a purchaser to be approved by the Commission. After careful evaluation of the commitments package, the Commission concluded that the remedies removed its competition concerns and to restore effective competition.

On 31 March 2003, DSM notified the Commission of an agreement under which it would acquire sole control of Roche Vitamins and Fine Chemicals (RV&FC). On 19 May 2003, the Commission opened a detailed second phase investigation.

DSM and RV&FC are active in a broad range of product areas, however, the only overlaps are in feed enzymes which are added to animal feed, and in particular non-starch polysaccharide degrading enzymes (NSP degrading enzymes) and phytase. NSP-degrading enzymes help animals release nutrients in their feed. Phytase is an enzyme used to increase the amount of digestible phosphorus in animal feed and to limit pollution by reducing the amount of phosphate in animal manure.

DSM and RV&FC belong to two different vertical alliances. DSM has an alliance with BASF and RV&FC with Novozymes, a Danish producer of industrial enzymes. In their respective alliances DSM and Novozymes are mainly responsible for research and development and production whilst BASF and RV&FC are mainly responsible for sales and distribution. Both alliances provide for a high level of economic integration and mutual interdependence.

The acquisition of RV&FC by DSM would have created a structural link between the two alliances and led to near monopolies on the market for phytase at both the levels of production and distribution.

In the course of the first-phase review of the case, DSM offered undertakings to terminate the DSM/BASF alliance and to divest its production and R&D activities in the field of feed enzymes. The Commission could not determine in a clear-cut manner, whether that solution would fully restore effective competition. A second phase inquiry was therefore launched.

The review revealed that the commitments as subsequently amended enabled full transfer of production and R&D capability, including intellectual property rights and all other necessary assets from DSM to a suitable purchaser to be approved by the Commission. This will create an independent and viable competitor on the feed enzymes market. .

DSM is incorporated in The Netherlands as a public limited liability company with its corporate seat in Heerlen. It is active world-wide in the development and production of a broad range of chemical and life science products including feed enzymes, performance materials and polymers and industrial chemicals. It has subsidiaries in Europe and in the United States.

RV&FC is principally active in the production and sale of vitamins and carotenoids. In addition, RV&FC distributes feed enzymes, certain vitamins and amino acids.

The operation is also being reviewed by the US Federal Trade Commission with which the Commission is closely co-operating.

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