Ag Executives Sell Merger Deals to Skeptical Senate Panel

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By Casey Wooten

Sept. 20 — The recent wave of mergers and acquisitions in the agriculture and chemical businesses won't raise prices for farmers or stifle innovation, industry executives told the Senate Judiciary Committee.

Of the top six U.S. and European agribusiness companies, five are in talks for a merger or a buy-out. The trend in consolidation could fundamentally reshape the global agrochemical and bioengineered seed industries, with critics saying that less competition could mean bigger costs for farmers already suffering under low commodity prices.

Executives from DuPont Co., Dow Chemical Co., Monsanto Co., Bayer AG and Syngenta Ag—all involved in proposed deals—told the panel that consolidation in the industry will create efficiencies to better bring new technologies to the market.

“The focus from Dow-DuPont will be on innovation, and a successful-innovation company will create jobs over time,” Tim Hassinger, president and CEO of Dow AgroSciences LLC, told the panel.

But panel members were largely skeptical.

“Further concentration in the industry will reduce choice and further raise the price of chemicals and seeds for farmers, which ultimately will affect choice and costs for consumers,” Committee Chairman Chuck Grassley (R-Iowa), said.

Concern was bipartisan, with Sen. Amy Klobuchar (D-Minn.) noting that the hot merger and acquisition climate would leave only a few companies at the top.

“Our farmers and consumers face enough challenges without the additional benefit of an anti-competitive market,” Klobuchar said. “The three transactions before us are substantial. Taken together they reduce the six major agribusiness firms to four.”

Flurry of Deals

Bayer announced Sept. 14 that Monsanto had agreed to a $66 billion acquisition bid, making it the biggest deal in the sector this year.

Falling crop prices have driven other deals, like the planned $59 billion merger between DuPont Co. and Dow Chemical Co., and well as the proposed $43 billion acquisition of Syngenta AG by China National Chemical Corp., also known as ChemChina (See previous story, 09/16/16).

The completion of those three deals would leave the final companies with more than 75 percent of the agrochemical market, according to data compiled by Bloomberg (See previous story, 09/16/16).

The spate of announcements sent members of the National Farmers Union, the second-biggest U.S. farmers organization, to Capitol Hill in early September, where they met with more than 30 lawmakers to argue against the high-dollar deals at the top of their industry .

ChemChina turned down an invitation to testify at the hearing, Grassley said.

Individual Concerns

Lawmakers said each of the deals raises unique questions about competition and the future of the agrochemical and seed industries.

Grassley said he was concerned that with acquisitions of biotech seed companies like Syngenta by state-owned ChemChina, the country would offer favorable, trade, litigation and regulatory treatment for their own bioengineered seeds over U.S. products.

Erik Fyrwald, CEO of Swiss-owned Syngenta, attempted to beat back those concerns, saying that the company's entrance into the Chinese market would help increase transparency for Chinese regulators.

“With this acquisition, I think the good news is China is more incentivized to improve their regulatory process because they will be invested heavily in technology and agriculture, which I think is a good thing for all of us,” Fyrwald said.

Farmer Pushback

Also testifying were representatives from the National Farmers Union, the National Corn Growers Association, the American Farm Bureau Federation and the American Antitrust Institute.

Roger Johnson, president of the National Farmers Union, said that consolidation in the food system extends beyond the seed and chemical industries to farm equipment and meat processing as well, while all farmers struggle with low commodity prices and profit margins.

“There is another element here, and I think it is market power,” Johnson said. “If you have less competition, the result is you can have these companies in a position of making more profit by charging farmers higher prices, and the competitive market is not going to force those costs down. That's a concern that I think our members have.”

To contact the reporter on this story: Casey Wooten in Washington at cwooten@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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