In the last 10 months announced mergers have included Dow Chemical Co. and DuPont; ChemChina and Syngenta; Bayer AG and Monsanto; Agrium Inc. and Potash Corp.
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| U.S. Senator for Iowa, Chuck Grassley. |
U.S. Senator for Iowa, Chuck Grassley, contacted both the U.S. Department of Justice and U.S. Federal Trade Commission regarding the potential mergers of Dow Chemical Co. by E.I. du Pont de Nemours and Co. and the proposed acquisition of Syngenta AG by China National Chemical Corp. (ChemChina). Both responded that they would be collaborating with each other and the U.S. Department of Agriculture (USDA), where appropriate, regarding their work to analyze proposed mergers in the seed and agrochemical industries.
In its letter to Grassley, the Justice Department said, “The Department will coordinate and collaborate with the Department of Agriculture and the Federal Trade Commission, as appropriate, on the impact of this and other proposed mergers in the agricultural sector.”
“Iowa farmers are concerned about rising input prices in a struggling agriculture economy that doesn’t look to be turning around anytime soon,” Grassley said. “Commodity prices are already at or below the cost of production. The consolidation trend we’re seeing in the seed and agrochemical industries has all of us concerned that less competition will mean increased prices for seeds, chemicals and fertilizers for farmers. The pledge from the Justice Department and the Federal Trade Commission for collaboration where appropriate is reassuring for those of us concerned about the current trend.”
In the Sept. 20 hearing the Senate Judiciary is scheduled to hear from: James Collins, executive vice -president, Agriculture Division e. i. DuPont de Nemours and Co.; Tim Hassinger, president and chief executive officer (CEO) of Dow AgroSciences; Erik Fyrwald, CEO of Syngenta International AG; Jim Blome, president and CEO of Bayer CropScience North America; Robb Fraley, executive vice-president and chief technology officer of the Monsanto Co.; Diana Moss, president of the American Antitrust Institute; Bob Young, chief economist and deputy executive director of public policy at the American Farm Bureau Federation; Chris Novak, CEO of the National Corn Growers Association (NCGA) and Roger Johnson, president of the National Farmers Union.
“Domestic regulatory hurdles for crop protection chemicals and delays in international approvals for new seed traits represent significant barriers to market entry,” Novak said in a prepared statement before he testified on behalf of both the NCGA and the American Soybean Association (ASA). “These barriers slow down innovation and drive up the cost of seed and chemicals. The process of developing and testing new products, and then securing regulatory approval to bring them to market, requires a substantial amount of time and money. As a result, fewer and fewer companies have the resources to be players in the market. This trend toward consolidation will continue unless and until Congress addresses these regulatory hurdles.”
Together, the NCGA and the ASA represent more than 500,000 corn and soybean farmers nationwide, and they have a direct interest in ensuring a competitive marketplace for crop production inputs, the associations said. Earlier this year, the NCGA and the ASA joined forces to conduct an analysis of a recently announced merger and ensure their members’ best interests were represented in conversations with the Department of Justice.
In written testimony submitted to the Senate Judiciary Committee for the hearing, the NCGA and the ASA argued that a competitive marketplace is measured by more than the number of competitors, but also their size and relative ability to compete.
“True competition is not based solely on the number of players within a given market,” the written testimony states. “Strong competition can result from having several evenly-matched companies fighting for market share within the seed, chemistry and trait development markets.”
In the Dow Chemical Co. and DuPont merger announced on Dec. 11, 2015, the merged company will eventually spin off the merged company, DowDuPont, into three separate companies. In February 2016, China National Chemical Corporation (ChemChina) offered $43 billion cash for Syngenta. This deal makes ChemChina the world’s largest supplier of crop protection products.
Bayer AG on Sept. 14 agreed to acquire St. Louis, Missouri, U.S.-based Monsanto Co. in an all-cash transaction for $128 per share, equating to a total purchase price of approximately $66 billion. According to the companies, the transaction will unite two “different, but highly complementary businesses.” The combined business is expected to benefit from Monsanto’s leadership in seeds and traits and Climate Corp. platform along with Bayer’s broad crop protection product line.
Agrium Inc. and Potash Corporation of Saskatchewan Inc. on Sept. 12 agreed to merge operations, a move that once complete will create the largest crop nutrient company in the world.
