Proposed Dow-DuPont Merger Must Clear Regulatory Hurdles
STEVE INSKEEP, HOST:
Dow Chemical and DuPont would like you to call them Dow-DuPont. That'll be the company's new name if a planned merger goes through. Each company is huge, and combined, Dow-DuPont would be worth $130 billion. The question is whether that is too big or, more precisely, too dominant in the industry for antitrust regulators. NPR's Yuki Noguchi reports.
YUKI NOGUCHI, BYLINE: Historically, Dow and DuPont have a lot in common. They're both over a century old and developed many of the products that go into commonly used items. Dow makes chemicals used in Styrofoam, shoe soles, car parts and consumer packaging. DuPont developed synthetic rubber, nylon and Teflon, to name a few. After merging, the companies propose to split into three independent publicly traded companies - focusing on agriculture, material sciences or plastics and specialty innovative products. Today, the companies say their products don't compete much head-to-head. Edward Breen is CEO of DuPont, who will retain that title in the merger. In a conference call with analysts, he said he doesn't expect antitrust regulators to require much divestiture, even among the agricultural products, where Dow and DuPont would be the world's third-largest player.
EDWARD BREEN: It would be very limited where there's product overlaps.
NOGUCHI: Experts, however, say there are some open questions. Seth Bloom is an antitrust lawyer who advises companies, though not the companies in this deal. He says each of the three split companies will become dominant players in their respective markets. Regulators will have to look at each product and whether a combination would eliminate a key competitor or whether it will adversely affect customers.
SETH BLOOM: This is going to be what's going be the heart of the matter is to what extent do the product lines overlap?
NOGUCHI: Bloom says the Obama administration has approved some deals but notably blocked others, including General Electric's bid for Electrolux and Sysco and the U.S. Foods merger. He says, politically, it's hard to read the tea leaves which way regulators will go.
BLOOM: In the last couple years, I think the antitrust regulatory environment for mergers like this has gotten tougher.
NOGUCHI: The proposed Dow-DuPont deal raises the most questions in the agriculture industry, where analysts agree the companies have large market share in seeds and pesticides. Patty Lovera is assistant director of Food and Water Watch, a consumer and environmental advocacy group. She says there has already been massive consolidation in the industry, and notes that farmers are concerned about further combinations limiting choices and increasing prices.
PATTY LOVERA: To see fewer players and more control is not good news.
NOGUCHI: She notes also that a combination could limit innovation. She points to $3 billion in cost savings the companies are highlighting, some of which would come out of their research and development budgets.
LOVERA: There's absolutely, like, a sustainability issue, a resilience issue if you have fewer providers of seeds. Do they have an incentive to provide a lot of different variety?
NOGUCHI: Dow and DuPont say they expect the deal to close in the second half of next year. Yuki Noguchi, NPR News, Washington.
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