SAO PAULO (Reuters) - A unit of Brazil's competition regulator Cade has said Bayer AG's proposed takeover of Monsanto Co. could be detrimental to competition and urged conditions for Brazilian approval of the corporate tie-up, a document released on the agency's website shows.
The Bayer-Monsanto transaction, announced in September 2016, would create the world's largest integrated pesticides and seeds company.
The Cade unit said that anticipated merger-related efficiencies were insufficient to mitigate its competition concerns, according to the document dated Oct. 3.
It recommended what it termed as "structural solutions" as a condition for final approval the deal, which will be in the hands of Cade's seven-member tribunal.
Cade has 330 days to make a final decision since it began its review of the deal on April 24, a spokesman for the agency said. However, he added it may announce a ruling as early as Dec. 20.
The Cade unit said solutions included creating or strengthening another player to compete in the markets for soy and cotton seeds and in the sphere of biotech development.
But the unit has not engaged in an in-depth discussion with Bayer and Monsanto related to its suggested "remedies," the document said.
In an emailed statement to Reuters, Bayer said the unit's opinion is non-binding and does not mean the transaction will be blocked.
Hugh Grant, Monsanto's chief executive officer, said concerns expressed by Brazil's regulator are a normal step in the review process.
Brazil is Monsanto's biggest market outside of the United States.
In its second-quarter results, Bayer said sales of its crop science division tumbled more than 15 percent primarily because of its business in Brazil, an indication of the country's weight as a market for seed technology, insecticides and herbicides.
Deal opponents have asked Cade to block it or force divestments including Monsanto's Intacta RR2 IPRO soy seed technology and Bayer's glufosinate ammonium herbicides.
Last week, Monsanto's chief executive officer for South America, Rodrigo Santos, told Reuters the company was set on keeping rights to Intacta.
Cotton farmers against the transaction assert the merged company would control 14 out of 15 genetically modified cotton seed technologies available in Brazil.
If Cade orders asset disposals from the companies, authorities must see to it that the buyer is a relevant player in the biotech, seed production and crop defense segments, said attorney Rachel Mendonça, a partner at Mendonça e Nogueira Advogados.
Her law firm is representing three industry groups opposing the deal.
(Reporting by Ana Mano; editing by Alexander Smith and W Simon)