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U.S. regulators approve $62M merger of Dow Chemical, DuPont

June 15, 2017

The long-delayed $62 billion merger of chemical giants DuPont Co. and Dow Chemical Co. has been approved by U.S. antitrust regulators.

The Justice Department said Thursday it would approve the deal as long as the companies sell off some herbicide and chemical units to preserve competition. Those sales are already in the works.

The merger was originally announced in December 2015 and was initially expected to close in the first half of 2016. But it was delayed several times while U.S. and foreign regulators reviewed it.

Once merged, DuPont and Dow plan to spin off into three public companies: one focusing on agriculture, one on material science and one on specialty products.

European regulators approved the deal in March.

The new company will be called DowDuPont and have dual headquarters in Midland, Michigan, and Wilmington, Delaware.

The companies said Wilmington will be the headquarters for the combined agricultural business, but Indianapolis—the home of Dow AgroSciences, which has about 1,500 employees in the city—will be one of its two “global business centers.”

The companies said that the assets they agreed to sell to win U.S. approval didn’t go beyond what they had already agreed to with other jurisdictions. DuPont will sell off some of its herbicide and insecticide products and Dow will unload a plastics packaging unit, according to a settlement filed Thursday in federal court in Washington.

The so-called merger of equals is among a trio of mega-deals that would reshape the global agrochemicals industry if approved by regulators around the world. Bayer AG is seeking approval to buy Monsanto Co., while China National Chemical Corp.’s agreement to buy Syngenta AG is nearing completion. If cleared, the transactions together would consolidate the industry into four major players, including BASF SE.

The deals have drawn complaints from farmers and environmental activists who say the the combined companies’ control of pesticide and seed markets might increase prices for farmers.

The U.S. approval of the Dow-DuPont tie-up follows the European Union’s clearance of the deal in March, when DuPont agreed to divest part of its pesticide business, including research and development. Brazil, China and India have approved the deal, while Canada’s decision is still pending. The companies said they “are working constructively” with regulators in the remaining jurisdictions.

Ed Breen, DuPont’s chairman and chief executive, will be CEO of the new company, while Dow’s chairman and CEO, Andrew Liveris, will be chairman.

The EU expressed concern that the combination would have halted work on new chemical products in areas where Dow and DuPont compete head to head. Officials found evidence that the pair would have cut back on the amount they spent on developing products. Only Bayer, BASF SE and Syngenta match the two firms in discovering, developing and selling agricultural chemicals.

Dow and DuPont said on March 31 that they were pushing back the expected closing of the deal, which they reached in 2015, to August after DuPont agreed to sell part of its pesticides business to FMC Corp. to satisfy competition regulators. That pending deal would make Philadelphia-based FMC the world’s fifth-biggest producer of crop-protection chemicals. South Korea-based SK Innovation Co. agreed to buy the Dow packaging unit in February.

The companies said Thursday that they still expected the deal to close in August.

Dow and DuPont are planning to split the merged company into three within 18 months of closing, with the first spinoff a materials-science company that will retain the Dow name.

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