Merger between Dow and DuPont is approved with restrictions

On the judgment session of 17 May 2017, the Tribunal of the Administrative Council for Economic Defense – CADE approved, with restrictions, the merger between the companies Dow Chemical and DuPont de Nemours (Merger nº 08700.005937/2016-61). 

Dow operates in the market of performance plastics and performance materials and chemicals, agricultural sciences and products and services related to energy and hydrocarbons. DuPont operates on a variety of chemical products, polymers, agrochemicals products, seeds, food ingredients, among other materials.

According to the Report Commissioner, Paulo Burnier, the transaction engenders a high concentration in the markets related to materials science, such as acid copolymers and ionomers, petrochemical products used in a large variety of  end-use  applications; crop protection products, mainly insecticides and herbicides used in several crops; and corn seeds, including the development of transgenic seeds. Aiming at addressing  the  identified competition concerns and enabling  the merger authorization by the authority, Dow and DuPont proposed remedies, negotiated with CADE’s General Superintendence, which resulted in a Merger Control Agreement (ACC, in its acronym in Portuguese), approved by CADE’s Tribunal.

Because it is a 100% foreign transaction in a corporate point of view, the majority of the remedies were coordinated with other jurisdictions. 

“This case reflects CADE’s institutional maturity in the coordination of transnational mergers, with the identification of competition concerns in common with other jurisdictions, and the identification of local and particular concerns in Brazil. It was possible to create a coordinated remedy with the rest of the world regarding common problems and to establish specific remedies for the Brazilian market”, said Mr. Burnier.

ACC

In relation to the materials science market, the companies are committed to divest Dow’s acid copolymer global business (which consists in a relevant set of tangible and intangible assets and workforce required to ensure the viability and the competitiveness of the business) and ionomers. The divestments would redress the overlap between the activities of the companies in these specific markets.

Regarding the remedies related to the crop protection market, the companies also proposed to divest assets of Dupont’s herbicides and insecticides business. Among other measures, the remedies  also  entails the transfer and/or license of certain products, product registrations, registration data, intellectual property (including registered brands, patents and know-how), human resources, customer records, agreements with third parties, production facilities and workforce.

In the seed market, it was established the divestiture of certain assets related to Dow’s corn seed business in Brazil. It includes the transfer of the copy of the DAS Sementes’ germplasm bank, the transfer of part of the hybrids in Pipeline and commercial hybrids of Dow in Brazil, and the transfer of production facilities, research centers, brands, staffs, and sales force.

The proposed ACC also establishes minimum requirements for potential buyers. This measure aims to define an economic agent profile which would be capable of effectively compete with the new company resulted from the global merger. The procedures and  deadlines of the divestments are confidential.

The agreement was negotiated with CADE’s General Superintendence that recommended to the Tribunal the conditional approval of the merger. The Tribunal confirmed the terms of the ACC on 17 May 2017, during the judgment session.  "The quick judgment was simplified by the contacts between the Superintendence and the Tribunal during the analysis of the case at CADE", said the Reporting Commissioner, Mr. Burnier.