* Asset sales to help maintain product innovation
* Dow Chemical/DuPont deal one of three reshaping industry
* Opponents concerned about concentration of ownership
(Adds comments from American Antitrust Institute)
By Foo Yun Chee
March 27 Dow Chemical and DuPont
won the blessing of the European Union for their $130 billion
merger on Monday by agreeing to sell substantial assets
including key research and development activities.
The European Commission had been concerned that the merger
of two of the biggest and oldest U.S. chemical producers would
leave few incentives to produce new herbicides and pesticides in
the future. The deal is one of a trio of mega mergers that will
reshape the industry and consolidate six companies into three.
Asset sales would ensure competition in the sector and
benefit European farmers and consumers, the Commission said.
"We need effective competition in this sector so companies
are pushed to develop products that are ever safer for people
and better for the environment," European Competition
Commissioner Margrethe Vestager said in a statement.
"Our decision today ensures that the merger between Dow and
DuPont does not reduce price competition for existing pesticides
or innovation for safer and better products in the future."
The two other big deals in the industry are ChemChina's
$43 billion bid for Syngenta and Bayer's
acquisition of Monsanto.
Dow and DuPont said they were still on target for $3 billion
in cost synergies and $1 billion in growth benefits.
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
"This regulatory milestone is a significant step toward
closing the merger transaction, with the intention to
subsequently spin into three independent publicly traded
companies," Dow spokeswoman Rachelle Schikorra said in an email.
The EU approval may be a sign that U.S. regulators would
follow suit because the agencies have traditionally coordinated
on reviews and remedies for large multinational mergers, said
Diana Moss, president of the American Antitrust Institute
However, any required asset sales would likely reflect
antitrust concerns in the local marketplace.
"In the U.S., there are very high shares in corn and soybean
seeds. We would expect those problems to be significant enough
for enforcers in the U.S. to remedy them," Moss said.
The 1,000-page decision underlined the significance of the
merger. In return for the EU green light, DuPont will divest
large parts of its global pesticides business, including its
global research and development organisation.
The unit makes herbicides for cereals, oilseed rape,
sunflower, rice and pasture and insecticides for insect control
for fruits and vegetables.
Dow, in turn, will sell two acid co-polymer manufacturing
facilities in Spain and the United States, as well as a contract
with a third party through which it buys ionomers. The company
has already found a buyer in South Korea's SK Innovation
"The main surprises here are the inclusion of the pesticides
and the exclusion of any kind of seed assets," Bernstein
analysts wrote in a note.
The analysts also said they had expected EU to be concerned
about the concentration of seed sales, and that they would
require Dow to divest its corn seeds business.
"We see the required divestments here as smaller than we
originally expected, due to the exclusion of seed assets".
Antitrust experts said the regulator's demand to sell large
swathes of R&D facilities could set the benchmark for future
Lobbying group Friends of the Earth Europe criticised the EU
decision, saying that the three deals would lead to three
companies controlling about 70 percent of the world's
agrichemicals and more than 60 percent of commercial seeds.
"This decision to allow Dow Chemicals and DuPont to form the
world's biggest agribusiness company will give giant
corporations an even tighter toxic grip on our food and
countryside. For the public and nature such mergers are
marriages made in hell," said Adrian Bebb from Friends of the
The agriculture company it planned to create with DuPont
will be able to serve farmers better, helped by leveraging
strong pipeline in its seeds and chemistry business, and
competitive prices, Dow's Schikorra said.
"We're concerned about the signal this sends for U.S.
approval. We're concerned about further consolidation in an
already highly concentrated industry," said Barbara Patterson,
director of government relations for the National Farmers Union,
which represents 200,000 U.S. farmers and ranchers.
Sources said last week that ChemChina's bid for
Syngenta could be approved this week but the timing
could slip. Bayer and Monsanto are set to ask
for EU approval in the coming months.
Shares of both Dow Chemicals and DuPont were marginally up
in afternoon trading.
(Reporting by Foo Yun Chee, Vishaka George and Karl Plume;
editing by Robin Emmott/Keith Weir/Sriraj Kalluvila)