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Dow, DuPont Merger Faces Hurdles

Tuesday, November 8, 2016

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U.S.-based Dow Chemical and DuPont have once again failed to provide crucial data to European antitrust regulators—forcing the European Commission to suspend its review of the proposed merger between the companies for the second time in two months, according to reports.

News of the latest pause in the investigation into the proposed $130 billion deal came to light Friday (Nov. 4); while the actual review was halted in mid-October, days after its first suspension was lifted on Sept. 26.

©iStock.com / Joris Van Ostaeyen

EU antitrust regulators have requested additional documents from Dow and DuPont, suspending their review of the $130 billion proposed merger, reports say.

Meanwhile, the Australian Competition and Consumer Commission has voiced concerns about the planned merger, calling for submissions from interested parties.

The two chemical-industry giants announced last December that they plan to unite in a “merger-of-equals.” The plan has since been subject to regulatory hurdles worldwide due to the global nature of both corporations’ business.

Halting Review

The European Commission, an agency conducting an in-depth review to ensure the merger falls within European antitrust laws and other regulations, said it has once again paused its review, citing missing documentation.

EC Spokesperson Ricardo Cardoso explained to Reuters, “This procedure in merger investigation is activated if the parties do not provide an important piece of information that the Commission has requested from them.”

The nature of the missing paperwork was not disclosed.

The regulators first stopped the clock on its investigation in September, suspending the process for weeks.

A spokesman for DuPont told Durability + Design News that the companies are working closely with the EC to “produce the documents they request in a timely manner,” while remaining confident and focused on closing the deal in the first quarter of 2017, subject to approvals.

EU Regulators’ Concerns

As previously reported, the companies plan to form a new entity, DowDuPont, that would later split into three separate independent, publicly traded companies focused on material science, agriculture and specialty products.

The paints and coatings industry has focused on the side of the deal that will combine the two chemical and coatings titans into “powerful innovation and material science leaders.”

The EC’s concerns, however, lay on the agricultural side of the business, saying the proposed merger would create the world's largest integrated crop protection and seeds company.

Dow Scientist
Dow Chemical Company

The proposed merger between Dow Chemical and DuPont has raised a number of questions among regulators regarding innovation and prices in many product areas.

“It would also create a leading integrated producer of certain petrochemical products that are widely used in packaging and adhesive applications,” the EC noted. “The transaction would take place in industries that are already globally concentrated.”

Earlier in the year both companies had privately shared proposed concessions to EU authorities to address antitrust concerns, sources said, but the EC responded that the concessions were “insufficient to clearly dismiss its serious doubts.”

The agency may ask for additional concessions, according to Margrethe Vestager, head of the EC.

“The livelihood of farmers depends on access to seeds and crop protection at competitive prices," Vestager said. “We need to make sure the proposed merger does not lead to higher prices or less innovation for these products.”

EU officials are expected to decide on the deal by Feb. 6, 2017.

Issues in Australia

The ACCC said Thursday (Nov. 3) that it was concerned “about the effect that the proposed merger may have on competition for a diverse range of products, including insecticides, seeds, and materials science products," according to ACCC chairman Rod Sims.

Sims noted that the concerns exist because the companies produce products that overlap in many categories. Specifically, Sims notes that the companies may be the only potential suppliers of ionomer and acid copolymer materials to plastics manufacturers in Australia.

“The merger would remove competition between them, potentially to the detriment of Australian customers.”

The ACCC said it is working closely with overseas competition regulators, as many of the potential competition issues exist in many parts of the world.

The regulators have invited interested parties to submit responses by Nov. 24. The ACCC plans to make its final decision on the merger Feb. 2, 2017.


Tagged categories: Business matters; Coating chemistry; Coatings raw materials manufacturers; Dow Chemical Company; DuPont; Mergers; Raw materials; Regulations

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