The company names of Dow, left, and Dupont, right, appear above their trading posts on the floor of the New York Stock Exchange, Wednesday, Dec. 9, 2015. Both pics by (AP Photo/Richard Drew) FT Montage
© AP

Brussels has launched an in-depth investigation into whether a planned $130bn merger between US chemicals giants Dow Chemical and DuPont would limit competition for supplies that are crucial to Europe’s farmers.

The move raises the prospect of a dramatic unwinding of a series of megamergers that are under way. The potential deals would reshape the agrochemicals business and put control of nearly two-thirds of the industry in the hands of just three companies.

It could also exacerbate strained transatlantic relations over EU inquiries into corporate America’s business practices.

Past European Commission investigations into large-scale US deals, including scuppering GE’s attempt to acquire Honeywell in 2001 and complicating Boeing’s 1997 takeover of McDonnell Douglas, have sparked intense disputes between Washington and Brussels.

The new investigation by Margrethe Vestager, the hard-charging EU competition commissioner, comes as both the US and EU are reviewing ChemChina’s $44bn takeover of Swiss agribusiness Syngenta, which would be the biggest-ever overseas Chinese takeover.

German drugs and chemical group Bayer is also attempting to convince Monsanto, the leading US agribuinsess, to accept a $64bn all-cash offer, a merger that would further intensify regulatory scrutiny across the industry.

“The livelihood of farmers depends on access to seeds and crop protection at competitive prices,” Ms Vestager said of her decision to escalate her inquiry into the Dow-DuPont deal. “We need to make sure that the proposed merger does not lead to higher prices or less innovation for these products.”

Despite past differences over major US deals, the Obama administration in recent years has blocked or complicated several large mergers, earning a reputation as one of the most interventionist antitrust enforcers in recent American history.

In recent months, US regulators have moved to block a string of multibillion-dollar deals, including two health insurance mergers worth a combined $85bn and Halliburton’s $38bn takeover of oilfield services rival Baker Hughes. The US Department of Justice, which is also examining the Dow-DuPont deal, did not immediately respond to requests for comment.

As part of the original transation, DuPont and Dow had agreed to split the merged company into three parts following its completion, in an attempt to allay concerns of regulators both in the US and the EU, as well as in Brazil and Canada.

But those “commitments” to address the preliminary concerns of European regulators were dismissed as “insufficient” by Ms Vestager. Brussels has also expressed concerns about whether a merger would lead to a reduction in research and development.

Although both groups are based in the US, both have large European businesses and customer bases, giving the commission the freedom to investigate.

$64bn

All-cash offer made by Bayer for Monsanto

EU and American regulators were likely to take a different approach to the Dow-DuPont deal, said David Balto, a former US government antitrust enforcer. European authorities typically had lower market share thresholds and tested proposed solutions by asking farmers for their opinions. “The EU is a much tougher row to hoe,” Mr Balto said.

The EU’s treatment of US companies has been a source of strain between Brussels and Washington in recent months, with US giants such as Apple and Google both under long-running probes. Last year, Barack Obama accused the EU of protectionism, particularly in the way Brussels treated dominant internet groups in Silicon Valley. 

Dow and DuPont said in a statement that both had expected a “thorough review” from Brussels and that the investigation would not delay the closing of the deal.

“Dow and DuPont continue to expect the transaction to close by year-end 2016,” they said. The commission has until December 20 to make a final decision.

Additional reporting by Arash Massoudi in London and David J Lynch in Washington

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