FMC Corporation and DuPont announced a mutual agreement under which FMC will acquire DuPont assets singled out by the EU for divestment as a condition of its approval for the $131 billion merger of Dow Chemical Co. and DuPont.
Under the terms of the deal, which is structured as a hybrid asset swap and sale, FMC will acquire DuPont’s global portfolio of chewing pest insecticides, cereal broadleaf herbicides, and a significant part of DuPont’s global crop protection R&D initiatives.
At the same time, DuPont will acquire FMC’s Health and Nutrition business and be paid $1.2 billion in cash.
“Today’s announced transaction enables us to satisfy the European Commission’s approval conditions, while maintaining the strategic logic and value creation potential of our merger,” said DuPont Chief Executive Edward Breen.
The Particulars
The addition of the DuPont assets will make FMC Agricultural Solutions the fifth largest crop protection chemical company in the world by revenue stream, which after closing will be equally generated between the four major geographical regions of North America, Latin America, Asia, and Europe. FMC expects the acquired assets to generate about $1.5 billion in revenue in 2017, with $475 million of earnings before interest, tax, depreciation and amortization (EBITDA), bringing the company’s estimated annual revenue to approximately $3.8 billion.
“This is a significant step forward for FMC, and for our Agricultural Solutions business in particular,” said Pierre Brondeau, FMC president, CEO and chairman. “The combination of market-leading products from DuPont’s crop protection portfolio and its world-class R&D capabilities will transform our Agricultural Solutions business into a tier-one ag technology company.”
Drilling down, the DuPont insecticide portfolio acquired by FMC includes Rynaxypyr and Cyazypyr – both with full patents on their active ingredients, and Indoxacarb, which FMC estimates will generate more than $1 billion in revenue this year.
The broadleaf herbicide portfolio includes nine active ingredients, a range of well-known brands, and DuPont’s proprietary PrecisionPac technology – all additions that will greatly increase the diversity and balance of FMC existing exposure to herbicides.
“The crop protection industry is undergoing significant change, as evidenced by the consolidation currently underway,” said Brondeau. By combining these high-value products and R&D capabilities with our own product portfolio, pipeline and formulation expertise, FMC will be able to serve our customers better and accelerate the pace at which we bring new solutions to the market.”
In support of this expansion to FMC’s portfolios, the deal also brings with it a global manufacturing network, that includes four ingredient production facilities, 10 regional formulation plants, DuPont’s crop protection research headquarters in Delaware, 14 regional development labs, a library of 1.8 million synthetic compounds, a pipeline of 15 synthetic active ingredients currently in development, and the majority of DuPont’s crop protection research workforce.
The Merger
The European Union has approved the $130 billion merger of Dow Chemical Co. and DuPont with the condition that these DuPont Assets be divested along with Dow’s acid copolymers and ionomers business, which were acquired by South Korea’s SK Innovation earlier this year in a deal worth $370 million.
The conditions for approval were included due to the EU’s concern that the merger would dampen innovation, particularly in the areas of herbicides and pesticides, and would have a negative impact on competition.
“We need effective competition in this sector so companies are pushed to develop products that are ever safer for people and better for the environment,” said Margrethe Vestager, European Competition Commissioner.
“Our decision today ensures that the merger between Dow and DuPont does not reduce price competition for existing pesticides or innovation for safer and better products in the future.”
Although Dow and DuPont have overcome a significant challenge in attaining EU approval, the deal still needs to secure approval from U.S. regulators, who are expected to also require the companies to commit to certain divestitures.
Bloomberg reports that EU Competition Commissioner Margrethe Vestager told reporters that the EU and the U.S. were in “very close contact” regarding the deal, but did not yet know if U.S. requirements would differ from those put forth by the EU.
Originally scheduled to close in the second half of 2016, the expected completion date for the Dow-DuPont merger has now been pushed back to August 2017.
-Lynda Kiernan
Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.