March 30, 2017
European Commission OKs merger of US firms Dow and DuPont
The approval is conditional particularly on the divestiture of major parts of DuPont's global pesticide business, including its global R&D organisation.
Commissioner Margrethe Vestager, in charge of competition policy, explained that since pesticides are products that matter to farmers, consumers and the environment, there's a need for effective competition in this sector that would push companies to develop products that are ever safer for people and better for the environment.
"Our decision today (March 27) 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", she said.
The EC's decision followed an in-depth review of the merger. It said the commitments submitted by Dow and DuPont fully addressed concerns such as that the merger would reduce competition on price and choice in a number of markets for existing pesticides, and that the merger would reduce innovation—both to improve existing products and to develop new active ingredients. EC stressed that innovation 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 commitments submitted by Dow and DuPont address these concerns in full. The parties will remove the overlap in markets, where concerns were raised, by divesting the relevant DuPont pesticide businesses. They will also divest almost the entirety of DuPont's global R&D organisation", the EC said.
It concluded that the divestment package enables a buyer to sustainably replace DuPont's competitive effect in these markets and continue to innovate, for the benefit of European farmers and consumers.
Dupont said it would divest its Cereal Broadleaf Herbicides and Chewing Insecticides portfolios; and 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.
Additionally, on February 2, 2017, Dow announced an agreement with SK Global Chemical Co., LTD. to divest its global Ethylene Acrylic Acid (EAA) copolymers and ionomers business. These divestitures are conditioned on Dow and DuPont closing their merger transaction, in addition to other closing conditions, including regulatory filings, local employment law and governance.
DuPont is also currently in negotiations to divest the crop protection assets.
The companies first announced plans to merge in December 2015. In July 2016 stockholders of both companies gave the go-ahead.
DuPont said the combined company, which will be named DowDuPont, would create "highly focused leading businesses in agriculture, material science and specialty products".
Dow and DuPont shareholders will each own around 50% of the combined company, on a fully diluted basis, excluding preferred shares.