Dow-DuPont merger edges closer as EU clearance is given on FMC swap deal

28 Jul 2017 --- The completion of the upcoming merger of Dow and DuPont is edging closer as the European Commission has cleared the path ahead in terms of the divestments needed to satisfy regulators. The Commission has conditionally cleared both FMC's acquisition of parts of DuPont's crop protection business and DuPont's acquisition of FMC's Health and Nutrition business – both transactions are related to the Dow/DuPont merger divestment commitments.

And at the same time, Dow Chemicals has reported its second quarter results showing that sales are up to US$13.8 billion, an increase of 16 percent from the second quarter of 2016. 

Earnings per share are at US$1.07 and US$1.08 operating earning per share, while sales rose 8 percent, excluding the addition of Dow Corning’s silicones business, with increases in all operating segments and all geographic areas. 
 
As Dow and DuPont advanced their proposed merger transaction, both companies reaffirmed the expectation to close the deal in August, at the same time as achieving this conditional clearance in key European jurisdictions. 
 
Andrew Liveris, Dow’s chairman and chief executive officer, explained how this quarter has extended Dow’s track record of achieving nearly five years – 19 consecutive quarters – of year-over-year operating earnings growth and nearly four years – 15 consecutive quarters – of volume growth. 
 
“Just as importantly, we ended the quarter on the cusp of delivering the most comprehensive slate of growth investments in our industry – across the US Gulf Coast, at our Sadara joint venture and through the ongoing integration of our silicones platform,” he says. 
 
“And we made significant advancements toward our historic merger with DuPont, which will enhance our leadership as the world’s premier materials science company.”
 
He says how going into the merger, Dow is: “coming from a position of incredible strength,” with the right strategy, long-term growth drivers and the right portfolio. 
 
“Our team remains focused and disciplined, with a sharp execution mindset on the successful close of our merger with DuPont, rapid achievement of the synergies and realizing the value-creation of the intended companies, as well as a strong focus on delivering the materials science company, with a portfolio that will be unrivaled versus its peer group,” he says. 
 
Conditional clearance
Under EU Merger Regulation, the Commission has conditionally cleared both FMC’s acquisition of parts of DuPont’s crop protection business and DuPont’s acquisition of FMC’s Health and Nutrition business. 
 
Both of these transactions follow the Commission’s clearance of the Dow/DuPont merger back in March, which was subject to conditions.
 
DuPont committed to divest major parts of its global crop protection business, including its global research and development organization, which FMC now acquires. As part of the deal to acquire these parts of DuPont's crop protection business, FMC is selling its Health and Nutrition business to DuPont.

Clearance of this transaction is conditional on the divestment of FMC's sulfonylurea and florasulam businesses in the European Economic Area (EEA). Sulfonylureas and florasulam are herbicides used to control broadleaf weeds in cereal crops.

The Commission had concerns that the transaction, as originally notified, would have allowed FMC to unilaterally raise prices in a number of national markets in the EEA by eliminating a close competitor (DuPont). This would have been the case for products to control broadleaf weeds once crop seedlings have emerged (post-emergence control) in cereals. 

The commitments offered by FMC address these concerns.

FMC offered to divest its sulfonylurea and florasulam businesses in the EEA through exclusive licenses to thifensulfuron-ethyl, tribenuron-ethyl, metsulfuron-ethyl and florasulam – including mixtures with other active ingredients – and the necessary personnel to run these businesses.

Clearance of this transaction is also conditional upon the divestment of DuPont's global alginates business. Alginates are used as stabilizing, thickening or gelling agents in food and pharmaceutical products.

The Commission had concerns that the transaction, as originally notified, would have strengthened FMC's dominant position on alginates for use as pharmaceutical excipients and would have significantly reduced competition for food applications, by eliminating an important competitor (FMC) in the EEA market. 

The commitments offered by DuPont address these concerns.

DuPont offered to divest its global alginates business, including all tangible and intangible assets for the sourcing, development, manufacturing, packaging or sale of alginates. This includes DuPont's manufacturing plant located in Landerneau (France), a license to use DuPont's GRINSTED Alginate brand for a certain period of time, as well as DuPont's pectin-alginates mixtures.

In view of the remedies proposed in each of these transactions, the Commission concluded that, as modified, the proposed transactions would not significantly impede effective competition in the EEA. 

Both decisions are conditional upon full compliance with the respective commitments.

By Gaynor Selby