EU Commission Greenlights DowDuPont

28.03.2017 -

The European Commission (EC) on Mar. 27 approved the proposed $130 billion merger of Dow Chemical and DuPont into DowDuPont after the companies made promises to sell substantial assets including key research and development activities related to EU countries. Deadline for a decision was Apr. 3.

Following the merger of all assets, plans call for the new, even larger, chemical giant to split into three parts – including materials and specialty products in addition to agriculture.

Earlier in the approval process, EU Competition Commissioner Margrethe Vestager had expressed concern that the merger of the companies’ agrochemicals activities would curb innovation in the sector.  In greenlighting the deal, she said the promised asset sales would ensure competition in the sector and benefit European farmers and consumers.

"Our decision today ensures that the merger between Dow and DuPont does not reduce price competition for existing pesticides or innovation for safer and better products in the future," Vestager said. “We need effective competition in this sector so companies are pushed to develop products that are ever safer for people and better for the environment.”

In exchange for the EC’s blessing, DuPont agreed to sell off parts of its global crop protection business, including its research and development organization, and Dow said it would divest two production facilities for acid copolymers in Spain and the US. Both Dow and DuPont said they are still on target to realize $3 billion in cost synergies and $1 billion in growth benefits.

BASF is believed to be interested in picking up some of the divested crop protection assets.

The global mega merger is still to be approved by regulators in the US, Brazil, China, Mexico, India, Australia and Canada, but the companies said they are confident of clearance in all remaining jurisdictions. The Competition Commission of India (CCI) said on Mar. 22 it believed the deal was likely to have “an appreciable adverse effect on competition” in the country and directed the two companies to publish details of their proposed merger.

Approval by the EU is also being seen as a sign that US regulators will also agree to the fusion as the agencies have traditionally coordinated on reviews and remedies for large multinational mergers, Diana Moss, president of the American Antitrust Institute nonprofit group, told the news agency Reuters. However, she said any required asset sales would probably reflect antitrust concerns in the local marketplace.

In the US, Moss added, regulators could be expected to address the significant shares the two companies have in corn and soybean seeds. Similarly, analysts commenting on the EU’s approval said they had expected the Commission to require Dow to divest its corn seeds business.

In related news, reports about other pending mega mergers suggest that ChemChina's $43 billion bid for Switzerland’s Syngenta could be approved by the EU as early as next week, with the greenlight for Bayer's acquisition of Monsanto given by the end of the year.

Environmental advocacy group Friends of the Earth Europe (FoE) was critical of the EU’s decision on DowDuPont, saying the deals would lead to three companies controlling about 70% of the world's agrichemicals and more than 60% of commercial seeds.

"This decision to allow Dow Chemical and DuPont to form the world's biggest agribusiness company will give giant corporations an even tighter toxic grip on our food and countryside. For the public and nature such mergers are marriages made in hell," FoE commented.