Dow-DuPont Merger Gains EU Approval
Dow Chemical and DuPont are one step closer to becoming DowDuPont, with the companies’ recent merger approval coming from the European Union.
In order to make the $130 million merger happen, Dow and DuPont have agreed to sell key assets such as research and development activities.
Past Concerns Put to Bed
The EU had been worried that the merger of the two biggest chemical producers would impede on incentives for herbicide and pesticide innovations. Regulators had suspended the review twice seeking more information from both companies.
However, the end result landed with divestments smaller than what analysts originally anticipated.
DuPont will divest large portions of its pesticides business—including research and development organizations. This unit develops herbicides and pesticides. Dow will sell two acid co-polymer manufacturing facilities in Spain and in the United States, and a third-party contract through which it buys ionomers.
"The main surprises here are the inclusion of the pesticides and the exclusion of any kind of seed assets," Bernstein analysts wrote in a note.
European Competition Commissioner Margrethe Vestager said in a statement: "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."
What Happens Now
While the deal still needs to be approved by Brazil, China, Australia, Canada and the United States, Dow and DuPont released a joint statement citing the significance of the EU win.
“This regulatory milestone is a significant step toward closing the merger transaction, with the intention to subsequently spin into three independent publicly traded companies," read the statement, which is a nod to the previously announced plan to split into separate companies focused on material science, agriculture and specialty products once the merge is complete.
DuPont will divest large portions of its pesticides business—including research and development organizations.
While the U.S. typically follows suit with the EU, Diana Moss, president of the American Antitrust Institute, said that there are higher shares in corn and soybean seeds in the U.S. that might cause concern.
The deal is one of three mergers in the industry with ChemChina's $43 billion bid for Syngenta and Bayer's acquisition of Monsanto, which are both still awaiting approval.
While the approving bodies maintain that this deal ensures competition, not everyone was happy with the decision.
"We're concerned about the signal this sends for U.S. approval. We're concerned about further consolidation in an already highly concentrated industry," said Barbara Patterson, director of government relations for the National Farmers Union.