Comissão de Concorrência aprova fusão condicional da Dow e DuPont

The Competition Commission has recommended the approval, albeit with conditions, of the proposed merger between DowDuPont, Dow Chemical Company, and EI duPont de Nemours and Company (DuPont).

DowDuPont intends to buy Dow Chemical Company and DuPont. Dow’s activities in SA include the distribution of sunflower seeds, agrochemicals, material science products and food texturisers.

DowDuPont is controlled by Dow and DuPont, which are both listed on the New York stock exchange. DowDuPont is a newly incorporated holding company for the purposes of the proposed transaction.

Dow, a global diversified chemicals company headquartered in the US, does not manufacture any of these products in SA, but imports them from its manufacturing operations in different parts of the world.

DuPont is involved in the distribution of seeds in SA, including maize and sunflower seeds, and also the distribution of agrochemicals. Both Dow and DuPont are companies incorporated in accordance with the company laws of the US.

Dow is the ultimate parent company of the Dow Group, which is broadly active in the research, development, production and distribution of plastics and chemicals, agricultural products including seeds, and hydrocarbon and energy products and services. The DuPont Group researches, develops, produces, distributes and sells a variety of chemical products, polymers, agrochemicals, seeds, food ingredients and other materials.

Sipho Ngwema, head of communications at the commission, said on Thursday: “Although there is no direct overlap arising in respect of the commercialisation of hybrid and genetically modified hybrid maize seed in SA, since Dow does not have maize seed commercial operations in the country, the commission found that the proposed transaction will likely result in the removal of potential competition. This is so because Dow had plans … to enter the South African commercial maize seed market. The instant transaction removes the potential constraining influence that would have been exerted on DuPont and Monsanto had Dow proceeded with its plans to enter the South African market absent the merger,” he said.

The commission also said it had found that the proposed transaction was likely to lead to a substantial prevention or lessening of competition in the market for the supply of insecticides for chewing insects for citrus, deciduous fruits, and vegetables grown in SA. In respect of this, the merging parties were required to divest of DuPont’s entire insecticide business, including research and development associated with the development of such products.

“Since Dow and DuPont are large, global crop-protection manufacturers, the divestiture ensures that the buyer will be a separate entity, and, more importantly for SA, the condition requires that the purchaser of this divested business is specifically required to continue to supply the insecticides,” Ngwema said.

To address the concerns relating to maize seed, Dow will make available 81 maize hybrids and seven maize inbred lines to other third parties for licensing of these hybrids and inbreds in SA. Dow is also required to register its PowerCore and Enlist biotechnology traits in SA within two years of approval of the merger.

The commission said these conditions ensured that other smaller maize seed producers would be able to license and introduce new and different hybrids into SA and access the germplasm materials of Dow situated in countries that include Argentina. “This will likely improve maize seed varieties available to South African farmers, other than from the current two main suppliers being DuPont and Monsanto,” Ngwema said.

He said with regard to the biotechnology traits, the commission’s conditions also ensured that other maize seed producers would have alternative traits to license other than those of Monsanto. This would likely improve choice as well as the prices available for traits in the country.

Business LIVE, 06/07/2017