With the rumored megadeal combining chemical giants DuPont and Dow Chemical Co. finally announced today, the gaze now turns to regulators who will heavily scrutinize the agreement.
The $130 billion, all-stock merger is a prelude to the single entity being split into three separate publicly traded companies focused on agriculture, materials and specialty products, Reuters reports. The three-way split likely will happen 18 to 24 months after the deal closes, which is expected in the second half of 2016, the companies say.
It is unclear how the merger will affect plants both companies have in Louisiana, including the Dow Chemical plant in Iberville Parish.
Analysts say much of the regulatory scrutiny will be aimed at the businesses combining their agrichemicals business, like the sale of seeds and crop protection chemicals.
U.S. antitrust enforcers won’t just look at the deal as a simple combination of two conglomerates. They also will examine many of the products the companies make to determine where competition will be lost. Regulators also will be concerned about the agricultural sector, which could see big divestitures, antitrust experts say.
In agricultural chemicals, the merged company would overtake leader BASF, while in seeds the combination of Dupont Pioneer and Dow would challenge Monsanto, says Diana Moss, president of the American Antitrust Institute.
“The (seed) market is already dominated by Monsanto. You’re almost creating duopoly in the market, and that’s a problem,” she says.
The merger also creates pressure on rivals like Bayer AG and BASF to consolidate as falling crop prices curb sales.
“The biggest impact will certainly be in the agriculture market, where the seeds and crop chemical industries are to undergo rapid consolidation,” says SunTrust Robinson Humphrey analyst James Sheehan.
It could also prompt a renewed flurry of takeover bids for European rivals, with Syngenta AG the most likely target.
Monsanto Co. may take another shot at Syngenta, according to analysts. It abandoned a $45 billion offer for the Swiss company in August.
“(The question is) how does Monsanto respond to the strategic move by two of its main competitors?” Sheehan adds.
