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EU Approves Dow-DuPont merger

EU Approves Dow-DuPont merger

Dow Chemical (DOW.N) and DuPont (DD.N) gained conditional European Union antitrust approval on Monday for their $130 billion merger by agreeing to significant asset sales, one of a trio of mega mergers that will redraw the agrochemicals industry.

It said the asset sales would ensure competition in the sector and benefit European farmers and consumers.

Dow and DuPont have agreed to divest a significant part of DuPont's existing pesticide business, including its R.&D. organization, in particular DuPont's herbicides in cereals, oilseed rape, sunflower, rice and pasture and insecticides for chewing insect and sucking insect control for fruits and vegetables. There was "specific evidence" that Dow and DuPont would have cut back on the amount they spent on developing innovative products, the European Commission said in an emailed statement.

The merger will initially create a business worth an estimated $130bn, but the intention is to split the company into three independent, publicly traded companies.

An in-depth review was launched past year amid concerns that it could have reduced competition in both the pesticides and petrochemicals market across the European Economic Area (EEA), and had the potential to stifle innovation between companies in the pest control industry.

The EC's approval is dependent on DuPont and Dow selling off some parts of their businesses to satisfy competition concerns.

"Due to significant commitments on products and the worldwide research and development organisation, the merger of Dow and Dupont can be approved", EU Competition Commissioner Margrethe Vestager said.

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Dow and DuPont were expecting the merger to be approved last fall, but asked for an extension in September.

Stockholders approved the merger in July 2016.

The merger is expected to achieve cost savings of US$3bn.

The takeover, announced a year ago, is the first to win European Union approval out of a trio of mega-deals that would reshape the global agrochemicals industry.

Both companies had privately detailed to European regulators concessions they would be willing to make in August 2016, but Vestager raised concerns a year ago about whether the divestitures would be acceptable. In late January, DuPont CEO Ed Breen said the merger would be completed by the second half of 2017.

DOW stock and DD stock were both up slightly as of noon Monday, with DOW stock being up 11% year-to-date and DD stock being up 9% year-to-date. Arnold said the lack of a big stock gain is a reflection of a market that is down, overall, in early morning trading.

"They are both still modestly out performing the market today", he said.

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