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EU opens probe on DuPont, Dow Chemical deal — WSJ

August 12, 2016
Chemical Value Chain

The European Union’s antitrust authority opened a full-blown investigation into the proposed merger of Dow Chemical Co. and DuPont Co., which could require the companies to make bigger concessions to clear their blockbuster deal.

The European Commission said it would investigate whether the combination may reduce competition in crop protection, seeds and certain petrochemicals. The proposed merger, disclosed in December, would unite the two giants with a combined market cap of roughly $122 billion, before splitting into three separate companies. Last month, Dow and DuPont privately outlined concessions to EU authorities to address antitrust concerns there.

The EU’s deeper questioning of the Dow-DuPont deal comes as other top suppliers of seeds, weed killers and insecticide plan their own mergers, and antitrust officials for the bloc have signaled they will closely scrutinize consolidation in the sector.

“The livelihood of farmers depends on access to seeds and crop protection at competitive prices. We need to make sure that the proposed merger does not lead to higher prices or less innovation for these products,” said European Competition Commissioner Margrethe Vestager.

The commission said it found the concessions Dow and DuPont outlined on July 20 “insufficient to clearly dismiss its serious doubts” about the merger being in line with EU rules. The commission said it was concerned about the concentration of herbicide and insecticide businesses, among other product lines.

The companies on Thursday said they had anticipated “a thorough review” by regulators and still expect the deal would close by the end of this year.

A final EU decision is expected by Dec. 20. Given the scale of the two companies, the commission said it was ” cooperating closely” with competition authorities in the U.S., Brazil and Canada that are also scrutinizing the deal.

Dow climbed 19 cents to $53.64 while DuPont gained 29 cents to $68.99, both in 4 p.m. trading in New York.

The EU’s statement comes as other agriculture companies signal plans to merge, partly due to sliding commodity prices. If successful, those deals could ratchet up concentration in the $100 billion global market for seeds and pesticides, placing more than 80% of U.S. corn-seed sales and 70% of the global pesticide market in the hands of just three companies.

China National Chemical Corp., which maintains a pesticide division, has agreed to acquire Swiss pesticide and seed company Syngenta AG. Germany’s Bayer AG is pursuing a takeover of Monsanto Co., the world’s largest crop seed company by sales, though the companies haven’t come to terms on a deal.

The proposed Dow and DuPont merger is the only deal so far that has progressed far enough to officially notify EU regulators. But EU regulators are likely to be stricter than their peers in other regions in weighing whether the merger creates unreasonably high barriers to entry for rivals, said Ioannis Lianos, a professor of global competition law at University College London.

“[Antitrust regulators] don’t have an industry approach in their merger reviews, they have to develop a targeted approach,” Mr. Lianos said.

By Valentina Pop and Natalia Drozdiak

Source: Wall Street Journal via Nasdaq

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