EU Opens Antitrust Probe on Dow Chemical, DuPont Merger -- 2nd Update
August 11 2016 - 4:02PM
Dow Jones News
By Valentina Pop and Natalia Drozdiak
BRUSSELS -- The European Union's antitrust authority on Thursday
opened a full-blown investigation into a planned merger between Dow
Chemical Co. and DuPont Co., citing concerns the deal could lead to
higher prices for crop seeds and pesticides.
The European Commission said it would investigate whether the
deal may reduce competition in areas such as crop protection, seeds
and certain petrochemicals. The proposed merger, announced in
December, would unite the two industrial giants with a combined
market cap of about $122 billion, before splitting into three
separate companies.
The move raises the prospect that the companies may make further
concessions to win approval in the EU, after Dow and DuPont last
month outlined plans 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 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. In
particular, the commission said it was concerned about the
concentration of both companies' herbicide and insecticide
businesses, among other product lines.
The companies on Thursday said they had anticipated "a thorough
review" by regulators and still expected the deal would close by
the end of the year. Last month, DuPont Chief Executive Ed Breen
said he anticipated the deal closing in November.
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.
Shares of Dow climbed 0.1% to $53.49 while DuPont gained 0.4% to
$69 in late-afternoon trading.
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 already 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 rapid consolidation of the agriculture market poses a
challenge for regulators who normally conduct thorough reviews of
such mergers, seeking to keep prices competitive while safeguarding
innovation.
In a letter to members of European Parliament in late June, Ms.
Vestager suggested the EU would consider that several mergers are
taking place at once when reviewing a Bayer-Monsanto 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 also 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 15:47 ET (19:47 GMT)
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