Dow-DuPont shows innovation is EU’s M&A battleground

Bloomberg

Dow Chemical Co. and DuPont Co.’s success at converting smart ideas in the laboratory into products used by farmers across the world was nearly their undoing when European Union regulators started poking around their proposed $77 billion merger.
The bloc has been pushing to encourage investment in research and development as part of its political agenda, and EU merger watchdogs have taken up the cause as well, trying to ensure M&A doesn’t obstruct the pipeline of potential new products before they see the light of day. “We’ve now got remedies that focus on the brains behind things, not just what’s being created,” Jacques Derenne, a lawyer at Sheppard, Mullin, Richter & Hampton in Brussels, said in an interview. “That’s the trend. The EU wants to make sure that mergers don’t end up stifling the creations of innovators.” Dow’s takeover of DuPont, announced a year ago, is the first to win EU approval out of a trio of mega-deals that would reshape the global agrochemicals industry — and where the risk to innovation is at the heart of antitrust scrutiny.
To clinch EU approval for the tie-up, DuPont promised to sell a large part of its existing pesticide business, including R&D activities and personnel. The European Commission said they found “specific evidence” that the pair would have cut back on the amount they spent on developing products. Innovation has become “so important” for future competition “because the viability of the product line depends on your ability to keep on innovating,” Margrethe Vestager, the EU’s antitrust chief, told reporters Monday.