DuPont Co. and the Dow Chemical Co. have confirmed that the European Commission has initiated a Phase II review for the proposed merger of the two companies.
The companies initially began to obtain merger approval from the EC by submitting files seeking regulatory approval June 22.
The EC states that its preliminary concerns regarding the merger are weighed heavily on their business in chemicals for the agriculture industry.
Th companies' both have a strong portfolio of herbicides and insecticides, so the merger could reduce competition on these markets. Also the EC will look at Dow and DuPont's activities in nematicides and investigate if the merger is likely to lead to a reduction of innovation in crop protection as a whole.
Secondly, the EC is concerned about seeds as Dow and DuPont both develop “gene editing” technologies that could speed up the breeding of new seed varieties and the companies may have fewer incentives to license these technologies to competitors after a merger, or it may make the development of competing technologies more difficult.
Lastly, the EC will look at petrochemical products (polyolefins and monomers) as Dow and DuPont are both strong suppliers of specialty polyolefins and the Commission is investigating the effect of deleting one competitor and creating new vertical links in these concentrated markets. These links come from both companies supplying acid co-polymers and ionomers. Also, Dow is a leading supplier of polyolefin elastomers and monomers, in particular, glycidyl methacrylate, which DuPont also uses as input for its production of grafted polymers and ter-polymers.
The EC says it now has 90 working days—until Dec. 20—to make a decision. It states that the opening of an in-depth inquiry does not prejudge the final result of the investigation. Due to the worldwide reach of Dow and DuPont's activities, the EC says it is cooperating closely with other competition authorities such as the Department of Justice in the U.S. and the antitrust authorities of Brazil and Canada.
Dow and DuPont state that they continue to expect the transaction to close by the end of 2016, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals.