EU Opens Antitrust Probe on Dow Chemical, DuPont Merger -- 2nd Update

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 [e-mail] and Natalia Drozdiak at [e-mail]

(END) Dow Jones Newswires

August 11, 2016 15:47 ET (19:47 GMT)

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