The European Commission has given the go ahead to the Dow DuPont merger on the condition the chemical giants sell off parts of their businesses to allay competition concerns.
In a significant step forward in one of three so-called “mega mergers” in the agri-chemical space, the Commission granted conditional regulatory clearance yesterday (Mar 27).
However, the US$130bn (£103.4 billion) merger is subject to the condition that DuPont sells off large parts of its global pesticide business which includes all of its research and development group.
According to a joint statement from the two companies, specifically, DuPont will divest its Cereal Broadleaf Herbicides and Chewing Insecticides portfolios, alongside the R&D group. DuPont is currently in negotiations to divest the crop protection assets.
“The companies continue to work constructively with regulators in the remaining relevant jurisdictions to obtain clearance for the merger, which they are confident will be achieved,” it says.
Speaking in Brussels yesterday, EU Competition Minister Commissioner Margrethe Vestager, said as there are very few comparable competitors in pesticides, the merge would have significantly reduced competition for these products, had it gone ahead in its original form.
“Both Dow and DuPont produce a wide range of chemicals. For some of them, the two companies complement each other rather than compete. But their activities overlap significantly in other areas. In particular both sell products used by farmers to control pests that can harm their crops – in other words pesticides,” she said.
“These products affect all of us. They literally affect our daily bread. So they matter to farmers, to consumers and also to the environment.
“Effective competition in this sector allows farmers to choose from a range of products at affordable prices. It also pushes companies to continue developing new products that meet the high regulatory standards in Europe.”
Commissioner Vestager adds how the job of the European competition authority is to ensure mergers like this one do not deny Europeans the benefit of competition now and in the future.
“We need to ensure that a merger does not lead to higher prices for existing products or reduce choice. But it is just as important to ensure that it does not reduce innovation for new and better products. And in this case we had concerns in both of those areas…
“So we could not approve this merger in its original form. We were only able to agree to it, because the companies offered to sell off a significant part of their business, to preserve effective competition.
“To deal with competition today, the companies agreed to sell all of DuPont’s pesticides in the areas we were concerned about. Those products account for about half of the sales of DuPont’s pesticide business. The sale includes all the assets you need to make and sell those products. This means that whoever buys those assets will be able to take DuPont’s place on the market immediately.”
Two other mergers – Syngenta and ChemChina and Monsanto and Bayer – are expected to be considered by the European Competition Commissioner later this year.
Meanwhile, an alliance of more than 200 environmentalists are campaigns groups are against the planned mergers of all the above agriculture corporations, claiming the three companies left following successful mergers will concentrate market power and “exacerbate the problems caused by industrial farming”.
“Europe’s food and farming system is broken and if giant firms, like Monsanto and Bayer, are allowed to merge they will have an even tighter toxic grip on our food. The mergers are a marriage made in hell and should be blocked by regulators. We need to build a fairer and greener food system out of corporate control,” says Adrian Bebb, of Friends of the Earth Europe.