European antitrust authorities’ view on mega mergers ($222bn)

The European antitrust authorities are reportedly assessing three large mergers announced last year in the chemistry business, for a total value of as much as €222bn. These transactions are the $122bn Dow Chemical-DuPont merger, Bayer’s acquisition of Monsanto ($57bn), and ChemChina’s acquisition of Syngenta ($43bn). Authorities are apparently paying increasing attention to whether the deal will lead to a reduced supply of novel products. Therefore, it comes as no surprise that authorities reportedly have already sent Dow Chemical and Dupont a 800-page document reporting the risk of reduction in R&D efforts due to the merger. Specifically, the authorities are concerned that the deal could reduce the companies’ ability to provide consumers/customers with innovative solutions. This concern is supported by a statement by both groups’ managements, which have announced a $300m cut in R&D expenditure. The companies have excluded such risks, since they both have made significant discoveries in the field of microorganisms to encourage plants’ growth and in editing plants’ genetic heritage. The new group, originating from the merger, would benefit from these discoveries to launch new products. It is important to point out that a reduced ability to innovate and propose new solutions was the main cause of the failed $35bn merger between Halliburton and Baker Hughes. (Source WSJ)