SYT Syngenta Ag (delisted)

By Natalia Drozdiak 

BRUSSELS--The European Union's competition watchdog on Monday cleared Dow Chemical Co. and DuPont Co.'s merger and is expected soon to approve ChemChina's takeover of Syngenta AG, decisions that will consolidate the agrochemical market just as Bayer AG and Monsanto Co. gear up to notify EU regulators on their deal.

The European Commission on Monday gave Dow and DuPont a green light for their deal on the condition they sell parts of DuPont's global pesticides business and associated research and development, as well as Dow's acid copolymers and ionomers business.

China National Chemical Corp.'s planned acquisition of Swiss seed and pesticide maker Syngenta is also heading for approval, according to people familiar with the matter. The EU has until April 12 to decide on that deal.

Bayer, meanwhile, has yet to kick off the formal EU review process of its merger with Monsanto, though the companies have already been in contact with EU regulators. They are expected to formally register their deal with EU regulators in the second quarter of this year.

As the last in the group of several large mergers in the sector, Bayer and Monsanto could find it tougher to win clearance without painful remedies, such as asset sales, given that the market may already be more concentrated when the companies notify regulators of their merger. Bayer and Monsanto didn't immediately respond to requests for comment.

"The European Commission has always worked with the principle of first come first served, which means that those who come later will have to be measured against the market situation then having developed from the mergers ahead of them," EU antitrust chief Margrethe Vestager told reporters on Monday.

Ms. Vestager stressed, however, that the three deals were all "very different, with different problems and raise different concerns," despite being in the same agrochemical sector. She also said the market was unlikely to develop much between decisions in the first and second and then the third merger.

In the Dow and DuPont case, the EU was able to clear the deal because the companies offered "significant commitments" to address the regulator's concerns, Ms. Vestager said.

Analysts estimated that DuPont's planned pesticide divestiture would represent about $1.5 billion in annual sales, or about half DuPont's overall pesticides business, and 15% of annual revenue generated by its broader agriculture business. Wells Fargo analysts estimated that DuPont may get $3 billion for the business. Dow in February agreed to sell its copolymers and ionomers business, which helps make packages for toothpaste and beverages, to South Korea's SK Innovation for $370 million.

The Dow-DuPont merger, announced in December 2015, would create a business with a combined market capitalization of roughly $120 billion, before splitting into three separate companies.

The EU said it initially had concerns the deal would reduce competition on price and choice for pesticides and harm innovation when it comes to improving existing products and developing new active ingredients. But the commitments address those concerns in full, the EU said.

"The companies believe the outcome of the European Commission review is pro-competitive and maintains the strategic logic and value creation potential of the transaction," Dow and DuPont said in a joint statement.

Dow and DuPont are in negotiations to divest the remedies as a whole package to a single buyer, according to people familiar with the matter.

Ms. Vestager said the buyer of Dow and DuPont's assets would have to fulfill several criteria. The buyer would have to be independent from the merging parties; it would need to have the resources to make it a viable business, and it wouldn't create another anticompetitive problem.

The companies are in close touch with the commission over the execution of the remedies, the people said.

Jacob Bunge contributed to this article.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

March 27, 2017 11:36 ET (15:36 GMT)

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