EU Opens Antitrust Probe on Dow Chemical, DuPont Merger -- Update
August 11 2016 - 1:21PM
Dow Jones News
By Valentina Pop and Natalia Drozdiak
BRUSSELS -- The European Union's antitrust authority on Thursday
opened a full-blown investigation into plans by Dow Chemical Co.
and DuPont Co. to merge, on concerns the deal would reduce
competition the global agricultural sector.
The European Commission said it would investigate whether the
deal may reduce competition in areas such as crop protection, seeds
and certain petrochemicals. Announced in December, the proposed
merger aims to create an American industry giant with a combined
market cap of about $122 billion.
In-depth antitrust inquiries are common for large merger reviews
in Brussels and don't necessarily mean a deal will be blocked. If
the EU confirms its concerns, the companies can decide to offer
concessions, such as selling assets, to assuage the regulator. If
those aren't deemed sufficient, Brussels can block the deal.
"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.
Dow and DuPont on July 20 sought to address some of the concerns
raised by the EU, the commission said. However, the commission
found their commitments "insufficient to clearly dismiss its
serious doubts" about the merger being in line with EU rules.
Given the scale of the two companies, the commission said it was
"cooperating closely" with other competition authorities in the
U.S., Brazil and Canada, which are also scrutinizing the deal.
DuPont and Dow on Thursday said they had expected "a thorough
review" by regulators, but were still confident about the deal
closing by the end of the year.
A final EU decision is expected by Dec. 20.
The EU's statement comes as other agriculture companies have
also signaled plans to merge, partly due to sliding commodity
prices. The deals could place a significant share of the corn-seed
and pesticide market in the hands of just three companies.
China National Chemical Corp. has already agreed to acquire
Swiss pesticide and seed company Syngenta AG, while Bayer AG and
Monsanto continue to informally discuss the possibility of a
takeover by the German life-sciences company.
The consolidation of the agriculture market in a relatively
short time-span poses a challenge for competition regulators who
want to keep prices competitive while safeguarding innovation but
who normally assess the affects of a merger on the market on an
individual basis.
In a letter to members of European Parliament sent in late June,
Ms. Vestager suggested the EU would consider the context that
several mergers in the sector would be taking place at the same
time in any review of a Bayer-Monsanto deal.
However, Dow and DuPont is the first and so far only deal of the
group to be officially notified by the EU.
"Of course, (antitrust regulators) look to the market, but they
don't have an industry approach in their merger reviews, they have
to develop a targeted approach," said Ioannis Lianos, a professor
of global competition law at University College London.
The EU will likely be stricter in its review of the deals,
compared with other regulators, when analyzing whether the mergers
create more barriers to entry for other rivals, Mr. Lianos
said.
Write to Valentina Pop at valentina.pop@wsj.com and Natalia
Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
August 11, 2016 13:06 ET (17:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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