Daily Archives: March 27, 2017

European Union Approves Dow, DuPont Merger

European Union Approves Dow, DuPont Merger

The European Union has approved the $77 billion merger between Dow Chemical Co. and DuPont Co. This approval would transform the global agrochemicals industry. There will now be only three giants in this industry. The other major deals in this industry include Bayer AG buying out Monsanto Co. and China National Chemical Corp. buying out Syngenta AG.

Regulators were initially concerned with the DuPont’s sale of its global pesticide business. Du Pont is now willing to divest a big portion of its existing pesticide business arm. This sale would include where the products such as sunflower and oilseed rape are made. In addition, Du Pont will also sell their global R&D organization.

Dow on the other hand will sell its plants that produces co-polymers. These plants are located in Spain and the U.S.

Europe was worried that the merger would lead to reduced research spending and bring prices up which would lead to the economic demise of European farmers.

Dow and DuPont 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 concessions to the EU still ensure the strategic logic and value creation potential of the transaction.”

Syngenta and ChemChina awaits an April 12 deadline for EU to decide on their merger while Bayer seeks to ask for an EU approval of its $66 billion takeover of Monsanto Co.

Environment activists continue to appeal to the EU to disapprove all three mergers as these mergers would lead to a 70% monopoly of the world’s agrochemicals and 60% of the global production of commercial seeds.

Greenpeace and Friends of the Earth Europe said, “Through dominant market share and sheer political power, they would unduly influence our agriculture and food system. These mergers risks major monopoly outcomes that might increase prices for farmers and customers.”

Once the merger is done, the combined entity must split into three independent companies. The companies will be located in Wilmington and Midland, Michigan.

Margaret Vestager, E.U. antitrust chief, 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. The bloc’s conditional approval ensures that the merger does not reduce price competition for existing pesticides or innovation for safer and better products in the future.”

Dow and DuPont said, “Longer term, the intended three-way split is expected 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 Dow and DuPont merger will still have to be approved by Canada, Brazil and the United States but the victory over at EU is significant and will influence other countries looking at the deal. The expected closure of the transaction is before July.

DuPont is based in Wilmington, Delaware while the headquarters of Dow is in Midland, Michigan.