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Dow-DuPont merger will create world's top seeds, sprays group

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Dow Chemical and DuPont said that the creation of the world's biggest agrichemicals and seeds company, stemming from their $130bn merger, would be created with only minor risk of the concentration of market powers which trigger antitrust concerns.

The US chemicals conglomerates on Friday revealed details of a merger, rumoured earlier this week, which will see the group initially combine into DowDuPont- a group with revenues of some $84bn a year, at 2014 values, and earnings before interest, tax, depreciation and amortisation of $15bn.

However, the aim is, 18-24 months after the merger is completed, to separate out the combined Dow-DuPont businesses into three spin-offs – in agriculture, materials science, and speciality products.

The agriculture business - which will combine a DuPont unit best known for its Pioneer seeds with a Dow Chemical division more weighted towards agrichemicals – will rank as the world leader in the sector, with sales of $19bn.

The tie-up would overtake US-based Monsanto, with combined seed and agrichemicals sales of $16bn, and Switzerland's Syngenta on $14bn.

'Very limited'

However, the creation of the merged Dow-DuPont ag business would occur without triggering alarm bells over concentration of market powers, Andrew Liveris, the Dow chief executive, said.

"It would be very limited where there is product overlap in almost all geographies," he told investors.

"We have been through this, we have analysed it in detail. It would be very minor if there is any.

"These are highly complementary businesses."

The analysis contrasts with the large disposals that were seen likely necessary to enable the takeover of Syngenta that Monsanto attempted earlier this year, but was rebuffed by its Swiss peer in part on indeed on concerns of the likely level of antitrust interference the deal would cause.

'Logical and compelling'

Mr Liveris added that the Monsanto bid for Syngenta had "triggered a lot of conversations", spurring consolidation in the sector, if the US-Swiss combine itself failed.

"Consolidation in the ag industry is a natural step and this [Dow-DuPont] transaction is the most logical and compelling combination," he said.

"We are creating the world's leading agriculture company by bringing together DuPont's unrivalled market access and industry-leading germplasm and breeding capabilities, and Dow strengths and traits and crop protection.

"We will have the most complete portfolio of any ag company," split roughly 50:50 between seed and agrichemical operations, compared with a Monsanto operation skewed towards seeds, and Syngenta to sprays.

Market reaction

The deal will, in agriculture, create the opportunity for $1.3bn of deal benefits, such as cutting out duplicated costs, out of a total of some $3bn from the Dow-DuPont merger.

Some $1.5bn synergies will be available in material science, and $300m in specialist products.

Nonetheless, the announcement – which will see Dow shareholders take over 52% of the combined company, and DuPont investors 48% - failed to support the companies' shares, which had already risen in anticipation of the tie-up.

Dow shares stood 2.5% lower at $53.56, and DuPont stock down 5.8% at $70.21, in afternoon deals in New York.

By Mike Verdin

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