BRUSSELS - Dow Chemical (DOW.N) and DuPont (DD.N) won the blessing of the European Union for their US$130 billion merger on Monday by agreeing to sell substantial assets including key research and development activities.

The European Commission had been concerned that the merger of two of the biggest and oldest U.S. chemical producers would leave few incentives to produce new herbicides and pesticides in the future. The deal is one of a trio of mega mergers that will reshape the industry and consolidate six companies into three.

Asset sales would ensure competition in the sector and benefit European farmers and consumers, the Commission said.

"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.

"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."

The two other big deals in the industry are ChemChina's US$43 billion bid for Syngenta and Bayer's acquisition of Monsanto (MON.N).

Dow and DuPont said they were still on target for US$3 billion in cost synergies and US$1 billion in growth benefits. The deal is still to be approved by U.S. regulators but the companies said they were confident of clearance in all remaining jurisdictions.

WEIGHTY DECISION

The 1000-page decision underlined the significance of the merger. In return for the EU green light, DuPont will divest large parts of its global pesticides business, including its global research and development organization.

The unit makes herbicides for cereals, oilseed rape, sunflower, rice and pasture and insecticides for insect control for fruits and vegetables.

Dow in turn will sell two acid co-polymer manufacturing facilities in Spain and the United States, as well as a contract with a third party through which it buys ionomers. The company has already found a buyer South Korea's in SK Innovation.

Antitrust experts said regulator's demand to sell large swathes of R&D facilities could set the benchmark for future deals.

Lobbying group Friends of the Earth Europe criticized the EU decision, saying that the three deals would lead to three companies controlling about 70 per cent of the world's agrichemicals and more than 60 per cent of commercial seeds.

"This decision to allow Dow Chemicals and DuPont to form the world’s biggest agribusiness company will give giant corporations an even tighter toxic grip on our food and countryside. For the public and nature such mergers are marriages made in hell," said Adrian Bebb from Friends of the Earth Europe.

Sources said last week that ChemChina's bid for Syngenta could be approved this week but the timing could slip. Bayer and Monsanto (MON.N) are set to ask for EU approval in the coming months.