The mega-merger between chemicals and seeds producer DuPont and chemical corporation Dow is now expected to close later than anticipated. The $130bn deal has encountered a roadblock as the companies face further regulatory approvals, which means that this is now the second occasion the deal’s completion date has been pushed back.
The deal will now be subject to an investigation from EU competition regulators amid antitrust concerns. The investigation into the mega-deal will be the first of three agrichemical deals that EU competition commissioner Margrethe Vestager will look into this year, which also includes ChemChina’s $44bn purchase of Syngenta and Bayer’s $66bn acquisition of Monsanto. If all three of these mergers are approved, the resulting companies will control 62 per cent of the world’s patented seeds and 62 per cent of all pesticides.
The EU commission’s issue with the Dow and DuPont mega-deal lies within the merger’s risk to innovation in the crop protection market, which is estimated to have an annual worth of €60bn. In response to the investigation, Dow and DuPont have offered to divest business units in order to appease the EU regulators and push the deal through.
Assets included in the divestment are DuPont’s crop protection business and research and development, as well as Dow’s acid copbolymers and ionomers business. DuPont’s crop protection business makes up one third of the $9.5bn its agricultural unit produced in sales in 2016; while this would be a significant loss for DuPont, Dow’s own crop protection unit will strengthen the merged companies.
The divest offer means that the merger’s review deadline has now been extended until April. Deal making isn’t necessarily a speedy process, and the delay in the Dow and DuPont merger is a poignant example of how M&A can drag out if the deal causes concern with the regulating authorities. Since the deal was announced in August of last year Dow and DuPoint have gained $10bn in market value, signalling just how significant this megamerger will be for the sector. With that in mind, Dow and DuPont’s move to divest assets in order to expedite the deal is clearly a smart decision.
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