The EU on Monday approved the proposed mega-merger of US agrochemicals companies Dow Chemical and DuPont, declaring itself satisfied with their commitments to divest.

The European Commission had been concerned that the merger of two of the biggest and oldest US chemical producers would have few incentives to produce new herbicides and pesticides in the future.

"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," European Competition Commissioner Margrethe Vestager said in a statement.

Dow and DuPont had agreed to sell more businesses to address regulators' concerns.

"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."

Concessions to regulators

In return for the EU green light, DuPont will sell large parts of its global pesticides business, including its global research and development organization.

Dow in turn will sell two acid co-polymer manufacturing facilities in Spain and the United States, with German firm BASF widely seen as a potential buyer. In February, Dow had already announced an agreement with South Korea's SK Global Chemical to divest its global Ethylene Acrylic Acid (EAA) business.

Dow Chemical and DuPont announced their tie-up in December 2015 to create the world's biggest chemicals and materials group, with a combined market value of $130 billion (119 billion euro). The plan is to then break apart into three separate, publicly traded companies, which would focus on agriculture, material science, and the production and sale of specialty products.

Dow and DuPont are confident that the merger will generate more than $3 billion in cost savings.In a joint statement, both companies praised the EU's decision as a "regulatory milestone" and "a significant step toward closing the merger transaction, with the intention to subsequently spin into three independent publicly traded companies."

The EU's demand is "pro-competitive and maintains the strategic logic and value creation potential of the transaction," the statement added.

Dow and DuPont still need to win approval from the U.S., where the Justice Department is also expected to require divestitures to approve the merger, a person familiar with the matter told Bloomberg news agency.

Worries about wave of consolidation

The Dow-Dupont merger is part of a broader wave of consolidation in the agro-chemicals sector that has worried environmental activists and small farmers.

In the coming days, the EU is expected to decide on the $43-billion takeover bid by ChemChina for Swiss rival Syngenta. The EU is also to decide on German chemical company Bayer's $66-billion offer for US firm Monsanto, another mega-merger in the industry that has angered activists.

Opponents to the deals warned that the tie-ups would deepen threats to the environment, bring higher prices to struggling farmers, and boost the controversial genetically-modified crops industry.

If all tie-ups are successful, "the three resulting companies could control around 70 percent of the world's agro-chemicals and more than 60 percent of commercial seeds," said a letter from Friends of the Earth and co-signed by Greenpeace and dozens of other groups.

"Through dominant market share and sheer political power, they would unduly influence our agriculture and food system," added the letter, which was dated Monday.

The EU's green light for the Dow-DuPont merger spares Competition Commissioner Vestager from angering the administration of US President Donald Trump, just days before her visit to Washington on Friday.

Vestager has not been shy of tackling major US companies since she took on the competition brief in 2014, winning praise in Europe but criticism across the Atlantic. She has pushed through a series of anti-competition probes of Google and Amazon as well taking a historic 13-billion-euro decision against Apple.

Some US critics say she unfairly targets American companies but Vestager insists she has simply applied European Union competition rules.

bb/bea (dpa, AFP, reuters)