EU Opens Antitrust Probe on Dow Chemical, DuPont Merger -- 3rd Update
August 11 2016 - 7:00PM
Dow Jones News
By Valentina Pop and Natalia Drozdiak
BRUSSELS -- 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.
In-depth antitrust inquiries are common in Brussels for large
merger reviews and don't necessarily mean a deal will be blocked.
If the EU confirms its concerns, the companies can sell assets or
make other adjustments to assuage regulators.
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.
--Jacob Bunge contributed to this article.
Write to Valentina Pop at valentina.pop@wsj.com and Natalia
Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
August 11, 2016 18:45 ET (22:45 GMT)
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