Seed & Chemical Mergers: Senator Questions Effect on Farmers and Competition – DTN

Sen. Charles Grassley told agriculture reporters Tuesday he wants to be sure two separate federal agencies are working together to monitor what the major mergers and acquisitions in the seed and chemical industries will mean to U.S. farmers at a time when the farm economy is on the ropes.

Grassley, an Iowa Republican who chairs the Senate Judiciary Committee, was specifically pointing to concerns over the merger of Dow Chemical Company and DuPont Company as well as the potential acquisition of Syngenta AG by the China National Chemical Corp., known as ChemChina.

The Dow-DuPont merger, which has already been approved by shareholders of both companies, remains under review by the U.S. Department of Justice, while the ChemChina acquisition of Syngenta AG is under review by the Federal Trade Commission.

“I’m kind of a surprised we have two separate agencies working on something so similar,” Grassley said. “We have two mergers coming up at the same time. The fact that they’re simultaneous raises questions. I’m trying to make sure there is coordination and collaboration.”

The senator raises questions in a letter to officials with both the DOJ and the FTC, urging both agencies to work with the USDA when it comes to questions about how the actions could affect U.S. farmers.

In particular, Grassley expressed concerns the mergers and acquisitions could “substantially lessen competition and aggravate an already concentrated industry,” according to the letter to FTC Chairwoman Edith Ramirez and DOJ Principal Deputy Assistant Attorney General in the antitrust division Renata Hesse.

“Further, I urge the Department of Justice and the Federal Trade Commission to seek input from the Department of Agriculture on this complex and dynamic industry,” Grassley said in the letter.

“Because this agriculture sector has been the subject of a number of waves of consolidation in recent years, I am concerned that the convergence of these proposed transaction, as well as other currently being discussed, will have an enhanced adverse impact on competition in the industry and raise barriers to entry for smaller companies by altering the industry structure for seeds and chemicals.”

In addition, Grassley said concentration of the industry “will impact the price and choice of chemicals and seed for farmers, which ultimately will impact choice and costs for consumers.”

Grassley said there is concern that consolidation would diminish research and development that drive innovation in the seed and biotechnology industry.

“Because of the complex nature of this industry, it is important that these transactions not be reviewed in isolation,” he said in the letter.

On Feb. 3, 2016, Syngenta announced that ChemChina had offered to acquire 100% of the outstanding share capital of Syngenta at a price of $465 U.S. per ordinary share plus a special dividend of 5 Swiss francs to be paid conditional upon, and prior to, closing. The intended offer values Syngenta’s total outstanding share capital at around $43 billion.

Syngenta, based in Switzerland, generates about one-quarter of its sales in North America, where it is a top pesticide seller and supplies an estimated 10% of U.S. soybean seeds and 6% of corn.

Besides a review by the Federal Trade Commission, the Syngenta purchase must be cleared by the Committee on Foreign Investment in the United States, a committee represented by several federal agencies that reviews national security concerns created by such mergers.

Shareholders from Dow and DuPont voted to approve the merger in July, creating DowDuPont. The merger creates one of the largest biotechnology, seed and agrichemical companies in the world with an array of brand names for seed, biotech traits, insecticides, herbicides and fungicides.

The $130 billion merger is expected to generate about $3 billion in cost savings as each company announced facility closures and layoffs earlier this summer.

Also in July, Monsanto Co. rejected a $125-per-share offer from rival Bayer AG. Combined, Monsanto and Bayer would account for about $67 billion in annual sales and create the world’s largest seed and crop-chemical company.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN


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