European Union approves Dow-DuPont merger pending divestitures

28 March 2017, 12:47 | Andres Norman

Tim Scrivener

A close-up shot of a sprayer spraying pesticide

To get the go-ahead from the Commission, DuPont agreed to sell off parts of its global pesticide business, including its global research and development organisation. DuPont CEO Ed Breen will be the CEO of the merged DowDuPont.

The companies earned the approval by agreeing to sell substantial assets, including key research and development activities. Dow is set to sell a lot of its petrochemical, acid copolymers and ionomers business.

The Dow-Dupont merger is part of a broader wave of consolidation in the agro-chemicals sector that has anxious environmental activists and small farmers.

"Pesticides are products that matter - to farmers, consumers and the environment", said Margrethe Vestager, commissioner of the European Commission. It is not known when those countries will announce a decision.

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.

The European Commission had been concerned that the merger of two of the biggest and oldest U.S. chemical producers would have few incentives to produce new herbicides and pesticides in the future.

The deal is still to be approved by regulators in the United States, Brazil, China, Australia and Canada, but the companies said they were confident of clearance in all remaining jurisdictions.

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Ahead of Monday's decision, environmental campaigners renewed calls for the European Union to block all three deals, saying the combined companies would control around 70 percent of the world's agrochemicals and more than 60 percent of commercial seeds. The companies would focus on agriculture, material science, and the production and sale of specialty products.

DuPont said the company's first-quarter earnings would include a charge of 15 cents a share for "transaction costs associated with the planned merger with Dow. prior year GAAP earnings included a net benefit of 18 cents per share from significant items, primarily due to a gain on the sale of an entity".

This transaction is one of three proposed mega-mergers in the agrochemical sector.

The EU is also to decide on German giant Bayer's $66-billion offer for USA firm Monsanto, another mega-merger in the industry that has angered activists.

If all tie-ups are successful, "the three resulting companies could control around 70 percent of the world's agro-chemicals and more than 60 percent of commercial seeds", said a letter from Friends of the Earth and co-signed by Greenpeace and dozens of other groups.

These divestitures are conditioned on Dow and DuPont closing their merger transaction. Rumors of a March approval had been surfacing since late February. Bayer and Monsanto are set to ask for European Union approval in the coming months.

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