July 26, 2017
Dow to divest part of corn hybrid seed business in Brazil to CITIC Agri Fund
The Dow Chemical Company has announced that it has entered into an agreement with CITIC Agri Fund to divest a select portion of Dow AgroSciences' corn seed business in Brazil for the purchase price of US$1.1 billion.
The scope of the divestiture includes seed processing plants and seed research centres, a copy of Dow AgroSciences' Brazilian corn germplasm bank, the Morgan seed brand and a license for the use of the Dow Sementes brand for a certain period. The assets being divested generated revenues of around $287 million last year.
The US-based chemical company said the divestiture is intended to satisfy its commitments to Brazil's Administrative Council for Economic Defense (CADE) in connection with its conditional regulatory clearance of the proposed merger with DuPont. The divestiture will be conditioned on Dow and DuPont closing their merger transaction, in addition to other customary closing conditions, including approval of the divestiture transaction by CADE.
According to Andrew Liveris, Dow's chairman and chief executive officer, the agreement "further advances the regulatory approval process, and maintains the strategic logic and value creation potential of our merger with DuPont and the three independent companies we intend to create".
"We believe this agreement serves the best interests of all stakeholders including our shareholders, customers and employees. The combination of our portfolios, even with this divestiture, will create a much stronger agriculture company with greater choice and innovation for growers around the world", he added.
In a press release, Dow said the established assets involved in this local remedy are incremental to the previously announced divestment of certain parts of DuPont's global crop protection portfolio and R&D pipeline and organisation and Dow's global Ethylene Acrylic Acid copolymers and ionomers business, consistent with commitments already made to the European Commission (EC) and regulatory agencies in other jurisdictions.
EC conditional approval
On March 27, the EC approved with condition the proposed merger of the two chemical companies, particularly on the divestiture of major parts of DuPont's global pesticide business, including its global R&D organisation.
Both companies, Dow said, are working together for a seamless transition for all stakeholders.
"Dow and DuPont continue to work constructively with regulators in the remaining jurisdictions to obtain clearance for the merger and are making progress in fulfilling the requirements of the conditional approvals that have already been received", it said.
The merger transaction is still expected to generate cost synergies of around $3 billion and growth synergies of $1 billion. Both companies have reaffirmed their expectation to close the merger next month, with the intended spin-offs to occur within 18 months of closing.
CITIC Agri Fund was founded last year by CITIC Agriculture, a division of state-backed CITIC Ltd, along with Chinese seed firm Yuan Longping High-Tech Co Ltd and two other listed agricultural companies.
CITIC Ltd is China's largest conglomerate, which made its first foray into the seed business in 2014.