Merger Update

Dow-DuPont Merger Gains EU Approval, ChemChina-Syngenta Pending

Emily Unglesbee
By  Emily Unglesbee , DTN Staff Reporter
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Given that the Dow-DuPont merger combines two companies with significant seed and chemical holdings, the EU required the divestitures of a number of crop protection products from DuPont. (Graphic courtesy of Dow and DuPont)

ROCKVILLE, Md. (DTN) -- Despite initial backlash to the proposed mega-mergers among agro-chemical companies in the past two years, some of the deals appear to be inching toward finality.

Most recently, the European Commission approved the Dow Chemical and DuPont marriage, and some media reports suggest that ChemChina's acquisition of Syngenta will receive EU approval shortly, as well.

Here's where everything stands for now:

DOW-DUPONT

This merger, valued at $130 billion, received approval Monday from the European Commission, the European Union's regulatory body. The Commission demanded a number of divestitures, and both companies signaled in a dual press release that they would be open to additional sales to accommodate other regulatory agencies, as well.

For now, DuPont has agreed to sell off its "Cereal Broadleaf Herbicides and Chewing Insecticides portfolios," as well as its crop protection R&D pipeline, with the exception of seed treatments, nematicides and late-stage products, according to the press release. The company is still looking for buyers of these crop protection programs. Dow will sell its "global Ethylene Acrylic Acid (EAA) copolymers and ionomers business" to SK Global Chemical Co.

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While the deal has yet to gain approval from the U.S. Department of Justice, the EU was long viewed as the merger's biggest hurdle, so this development has investors feeling confident. (Both companies have traded steadily up in nearly complete sync since November 2016.) In addition to the U.S. and the EU, analysts expect a number of key agricultural producers to get a say in the deal's final version, including Australia, Brazil, Canada, China and India.

Once merged, DowDuPont has announced its intention to split into three publically traded companies, one of which will form a new giant in the agro-chemical landscape. This new agricultural company promised to be one of the largest in the world (and certainly in the U.S.), until Bayer announced in September 2016 its intent to acquire Monsanto.

CHEMCHINA-SYNGENTA

Both the Wall Street Journal and Reuters have reported that the European Commission is poised to issue its approval of ChemChina's $43 billion purchase of Syngenta at any moment. That would represent a significant step forward for the deal, which had been slowed when the commission pushed its review deadline to April 2017 earlier this winter. Among the issues the commission focused on was an overlap in crop protection portfolios, due to ChemChina's 2016 purchase of the (formerly Israeli) agro-chemical company, Adama Agricultural Solutions.

Moving forward, the deal will face scrutiny from U.S. regulators, after the two companies submitted their merger for review to the Federal Trade Commission in late January. However, the Committee on Foreign Investment in the U.S. (CFIUS) has already signaled no objection to the acquisition in August 2016.

ChemChina's acquisition of Syngenta would stand as the largest foreign purchase by a Chinese-owned company. Therein lies the concerns of U.S. agricultural stakeholders, who fear -- among other things -- that a state-owned Chinese company could wield unfair influence over China's approval of new biotechnology traits. The import approval process in China is notoriously political and is a major factor in seed companies' profitability and commercialization timelines.

Sen. Grassley, R-Iowa, introduced a bill called the State-Owned Entity Transparency and Accountability Reform (STAR) Act in the fall of 2016, in direct response to the ChemChina-Syngenta deal. The STAR act seeks to ensure that foreign-state-owned companies such as Syngenta could not dodge American court claims under the Foreign Sovereign Immunities Act.

BAYER-MONSANTO

Bayer will soon present its proposed $66-billion purchase of Monsanto to the European Commission, but for now, no regulatory authorities have issued any statements on this deal, which was only announced seven months ago, in September 2016.

Analysts agree that the sale would almost certainly force major divestitures, particularly in the cotton division. Bayer bought the Stoneville cottonseed brand from Monsanto in 2007, after Monsanto purchased the Deltapine brand and became the largest cottonseed company in the U.S.

Reuters reported in early March that the two companies had put up $2.5-billion-worth of assets for sale, and that soybean, cotton and canola seed and LibertyLink crops were expected to be among these divestitures. (Liberty Link has emerged as a key competitor against Monsanto's Roundup Ready crops, particularly in the wake of widespread glyphosate-resistant weeds.) BASF has positioned itself as a possible buyer for some of those assets.

For more information on the EU approval of DowDuPont, see the press release from the two companies here: http://bit.ly/….

Emily Unglesbee can be reached at Emily.Unglesbee@dtn.com

Follow Emily Unglesbee on Twitter @Emily_Unglesbee

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Emily Unglesbee