Dow and DuPont have checked off another approval for their proposed $130 billion merger.
The European Commission has approved under the EU Merger Regulation the proposed merger between US-based chemical companies Dow and DuPont. The approval is conditional in particular on the divestiture of major parts of DuPont’s global pesticide business, including its global R&D organization.
Commissioner Margrethe Vestager, in charge of competition policy, said in a release: “Pesticides are products that matter – to farmers, consumers, and the environment. 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. 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.”
The EU decision follows an in-depth review of the merger. The Commission had concerns that the merger as notified would have reduced competition on price and choice in a number of markets for existing pesticides, as well as finding new innovative solutions. As the EU Commission pointed out, innovation, both to improve existing products and to develop new active ingredients, is a key element of competition between companies in the pest control industry, where only five players are globally active throughout the entire research & development (R&D) process.
The Commission could not approve the merger in its original form and agreed upon the deal after the companies responded that they would divest all of DuPont’s pesticides in the areas they were concerned about.
Specifically, DuPont will divest its Cereal Broadleaf Herbicides and Chewing Insecticides portfolios. DuPont will also divest its Crop Protection research and development pipeline and organization, excluding seed treatment, nematicides, and late-stage R&D programs, which DuPont will continue to develop and bring to market, and excluding personnel needed to support marketed products and R&D programs that will remain with DuPont. DuPont is currently in negotiations to divest the crop protection assets.
“That will protect competition for the future,” said Vestager in a statement on the decision. “It will make sure that the divested product portfolio remains viable and competitive on a lasting basis. It will also allow the buyer of the divested business to develop new, innovative products.
In a release from Dow, the company said “This regulatory milestone is a significant step toward closing the merger transaction, with the intention to subsequently spin into three independent publicly traded companies. The transaction is expected to create significant cost synergies of approximately $3 billion with the potential for $1 billion in growth synergies. Longer term, the intended three-way split is expected to unlock even greater value for shareholders and customers and more opportunity for employees as each company will be a leader in attractive segments where global challenges are driving demand for their distinctive offerings.”
The merger approval still needs to get a thumbs up from the U.S. Justice Department. On Monday, the White House announced Makan Delrahim, will be nominated to head the U.S. Justice Department’s Antitrust Division. Under Delrahim, the Department will review not only the Dow/DuPont merger, but also Bayer and Monsanto, and ChemChina’s proposal to purchase Syngenta.
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