Agriculture executives defend merger ‘tsunami’

USA Today Network
By Jeff Mordock, The (Wilmington, Del.) News Journal
September 20, 2016

WASHINGTON — Agriculture company executives insisted the industry’s flood of merger activity will not raise prices or stifle innovation.

But members of the U.S. Senate’s Judiciary Committee remained skeptical, insisting fewer market players means less choices for farmers and consumers.

“Concerns have been raised about the loss of head-to-head competition of these transactions, and whether they will reduce incentives to invest in research and development,” said Chuck Grassley, an Iowa Republican and chair of the U.S. Senate Judiciary Committee. “Concerns have been raised whether these transactions will result in foreclosure of market access by competing seed companies to traits and germplasm, and whether they will enhance these companies to engage in exclusionary conduct.”

Grassley described the number of industry mergers as a “tsunami.”

Industry leaders, however, countered the consolidated companies will be more effective in an evolving agriculture market than as stand-alone businesses. For example, James Collins, who heads DuPont’s (DD) agriculture unit, said his company’s upcoming $130 billion merger with The Dow Chemical Co. (DOW) will create a stronger player that will create more choices and drive innovation.

“Dow and DuPont both have strong positions in different parts of the agriculture inputs market, but each needs additional capabilities to compete effectively,” Collins said of the deal, which once completed will result in the combined company being split off into three separate, independent businesses.

More choice and innovation was a theme repeatedly hammered by the executives Tuesday morning in a hearing before the Judiciary Committee on agriculture industry consolidation. Executives from Dow, Bayer AG, Monsanto (MON) and Syngenta (SYT) along with representatives from farm advocacy groups all testified. ChemChina, an agriculture company owned by the Chinese government that is finalizing its $43 billion merger Syngenta, declined an invitation to participate, Grassley said.

Although the Senate does not have any authority to block the deals, executive and expert testimony at the hearing may be used as part of the regulatory review process.

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