Dow and Dupont merger gets European Union go-ahead

A close-up shot of a sprayer spraying pesticide
Tim Scrivener

28 March, 2017

There was "specific evidence" that Dow and DuPont would have cut back on the amount they spent on developing innovative products, the European Commission said in an emailed statement.

On February 2, Dow announced an agreement with SK Global Chemical Co., divest its global ethylene acrylic acid copolymers and ionomers business.

In a joint statement, both companies praised the EU's decision as a "regulatory milestone" and "a significant step toward closing the merger transaction, with the intention to subsequently spin into three independent publicly traded companies".

The Commission is now conducting in-depth investigations into three other deals, including ChemChina's acquisition of Syngenta, HeidelbergCement and Schwenk's joint takeover of Cemex Croatia, and the proposed merger of Deutsche Boerse and the London Stock Exchange Group.

The moves to sell significant portions of both companies were spurred in part by the EU's concern that the Dow and DuPont deal would disincentivize innovation, specifically for herbicides and pesticides, and create less competition if both companies were allowed to keep all current business assets.

In return for the European Union green light, DuPont will sell large parts of its global pesticides business, including its global research and development organization. It "remains to be seen who they choose".

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DuPont and Dow must now fulfill certain commitments given to the EC. ChemChina has made a $43 billion bid for Syngenta and Bayer is seeking to acquire Monsanto. "We understand that this is a big change for the industry, that there are a lot of moving parts, that the regulators need to make very informed decisions".

Matt Arnold, an analyst for Edward Jones Investments in St. Louis, said the European Union is typically viewed as the toughest jurisdiction for merger reviews.

Dow and DuPont still need to win approval from the US, where the Justice Department is also expected to require divestitures to approve the merger, a person familiar with the matter told Bloomberg news agency. One of the three splintered companies, to be named Dow, would continue to own and run the Freeport complex, as well as DuPont's facilities in Orange, Texas, near the Louisiana border.

The deal still must be approved by regulators in Canada, Brazil, China, Australia, and the United States.

"Through dominant market share and sheer political power, they would unduly influence our agriculture and food system", added the letter, which was dated Monday. "These mergers risk major monopoly outcomes" that might increase prices for farmers and customers.

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