Two major chemical corporations, Dow Chemical and DuPont, are reportedly in the late stages of a possible merger. If such a deal is completed, it would become the largest ever deal in the chemicals industry, and it would cause major repercussions throughout the global agriculture market.
In fact, the resulting company of Dow and DuPont would be so large that it would immediately have to be split into at least two or three different businesses so that it doesn’t violate antitrust laws. Meanwhile, other chemical companies would likely have to form their own mergers in order to compete with the possible new American giant.
Less than four months ago, Monsanto nearly purchased Syngenta for $46 billion, but the offer was ultimately rejected. Monsanto is currently the single largest producer of pesticides in the world. If Dow and DuPont complete their incredible merger as expected, it might force Monsanto to make another attempt at obtaining Switzerland’s Syngenta.
It is believed that Monsanto would have to pay more than $490 per share in order to takeover Syngenta. Meanwhile, the state-owned China National Chemical Corporation is also rumored to be considering conducting a takeover of its own to stay competitive in the global market.
Dow has a market capitalization of about $59 billion, while DuPont follows close behind with $58.4 billion. In recent months, the companies confirmed that they are weighing their options for a possible merger. Both of the companies supply genetically modified seeds. As lower crop prices have been reducing farmer spending, there has been much speculation in the industry about potential deals being made.
A new company from Dow and DuPont would immediately become the largest seed and pesticide company in the world. It would also be the second largest chemical company after BASF of Germany.
Meanwhile, Monsanto would face tremendous pressure to retain its position as the largest seed trader in the world. Taking over another big player like Syngenta would immediately become a top priority, as big names utterly dominate the agriculture industry.
A Dow and DuPont combination would be a major agriculture player throughout the entire world. It would threaten companies not only in America, but Europe, Asia and South America as well. It is estimated that such a company would sell about 16% of the world’s pesticides, and it would be the third largest global crop chemicals supplier.
However, the possible merger would give other companies a window of opportunity. In order to complete the deal while still being compliant with regulatory standards, the new company would have to sell off some of its smaller businesses. These could be quickly gobbled up by European agricultural companies who would be very eager to expand.
While the merger is not official yet, it’s looking increasingly likely that a major shakeup is coming to the global agriculture industry. If this does indeed happen, the repercussions will be enormous.
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