By Liz Crampton
Dow Chemical Co. and DuPont Co. on June 15 earned U.S. antitrust approval for their $73 billion tie-up but the Justice Department told them to make divestitures to lessen the anticompetitive impact of the deal, which will create a global chemicals giant.
While Canadian antitrust officials still need to make a decision on the merger, U.S. approval is considered the last major hurdle for the deal. The divestitures are in line with what the European Union required in its approval of the deal in March.
As proposed, the merger would have eliminated head-to-head competition between Dow and DuPont, likely forcing farmers to pay higher prices for crop control chemicals, the DOJ said in a complaint filed in Washington, D.C., along with a proposed settlement. Dow and Dupont have signed off on the settlement, but a federal court still needs to approve it. The courts traditionally defer to the Justice Department in such cases.
Dupont and Dow are leaders in the U.S. agricultural chemical industry, with more than $70 billion each in market capitalization. Monsanto Co. is behind the two leaders, with just under $52 billion in market capitalization.
Here’s a breakdown of the assets that Dow and Dupont are selling off.
DuPont will divest certain herbicide and insecticides where the products overlap significantly with Dow-offered products.
Dow and DuPont offer herbicides that control broadleaf weeds in winter wheat crops. DuPont’s Finesse product is the top broadleaf herbicide used to combat the weed that threatens winter wheat crops. Dow Chemical recently introduced a new broadleaf herbicide for winter wheat, called Quelex.
Together, Dow and DuPont account for more than 40 percent of the total market, with combined annual sales of $81 million in 2015, according to the DOJ’s complaint.
Both companies also sell insecticides for chewing pests that are used to control insect infestations in crops. If the deal went through as proposed, the companies would control nearly 75 percent of the market, accounting for $238 million in annual sales.
DuPont has already announced that FMC Corp. would buy these herbicide and insecticide products.
Dow will divest packaging units for two types of plastics and associated assets, according to the agreement.
Dow and DuPont manufacture acid copolymers in the U.S. Dow makes acid copolymers in a facility part of its larger chemical complex in Freeport, Texas. DuPont produces acid copolymers and other high-pressure ethylene derivatives resins in facilities located in Sabine and Victoria, Texas. These resins are mixed with other plastic resins to make products like films, bottles, coatings and packaging.
Both companies produce ionomers in the United States. DuPont manufactures ionomers at the Sabine, Texas facility. Dow makes acid copolymers in its Freeport, Texas facility and then ships them to Odessa, Texas, where a third party converts them to ionomers.
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