Monday, December 14, 2015

IS THE DUPONT DOW MERGER A GAME CHANGER FOR AGRICULTURE COMMODITIES AND THEIR SUPPLY CHAINS?

Farmers Have Qualms About DuPont, Dow Chemical Merger

Farm groups call for thorough regulatory review



A Kansas farmer moves a pallet of DuPont Co.'s Pioneer corn seed. Farm groups are concerned the planned merger between Dow Chemical and Dupont will hurt competition in the seeds and pesticides markets. ENLARGE
A Kansas farmer moves a pallet of DuPont Co.'s Pioneer corn seed. Farm groups are concerned the planned merger between Dow Chemical and Dupont will hurt competition in the seeds and pesticides markets. Photo: Larry W. Smith/Bloomberg News
Farming leaders reacted with concern to the planned merger between Dow Chemical Co. DOW -3.47 % and DuPont DD -3.82 % Co., calling for regulators to scrutinize a deal that could give the companies broader clout in the markets for seeds and pesticides.
The deal, announced Friday, would create a combined company called DowDuPont worth more than $120 billion at current valuations that would later split into three publicly traded businesses focused on agriculture, material sciences and specialty products in nutrition and electronics.
DowDuPont’s revenue from its chemicals and materials businesses would be far larger, but the markets for those products tend to be more fragmented. The agriculture business would boast major market share: to about 41% of sales of U.S. corn seeds and related genetics versus DuPont’s current 35% and Dow’s 6%, for example.
What’s more, analysts expect the tie-up could fuel further deal making among the six companies that currently dominate the global market for seed and crop chemicals, a group that also includes  Monsanto Co. MON -0.14 % , Syngenta AG SYT -3.74 % , Bayer AG BAYRY 0.52 % and BASF SE. BASFY 0.69 %
Analysts expect the DuPont-Dow deal to face close examination—in the U.S. and the European Union as well as other major markets like Brazil. The “global nature of the antitrust hurdles are…likely to be significant,” analysts at Piper Jaffray PJC 0.89 % & Co. wrote.
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Dow and DuPont executives said they didn’t anticipate problems. DuPont Chief Executive Ed Breen said in an interview that they plan to divest only minor pieces of their businesses--“nothing that would move the needle,” he said.

It’s time for federal regulators to remember that bigger isn’t always better.
—National Farmers Union Roger Johnson
The National Farmers Union said that having just five major players “would almost certainly increase the pressure for remaining companies to merge, resulting in even less competition, reduced innovation and likely higher costs for farmers.”
“It’s time for federal regulators to remember that bigger isn’t always better,” said the group’s president, Roger Johnson.
The National Corn Growers Association said it would study the merger’s likely impact on research, grain pricing, and costs for seeds and pesticides and “will do all we can to protect farmer interests and preserve an open and competitive marketplace.”

“DuPont and Dow are two titans of American industry and the proposed merger demands serious scrutiny,” said Senate Judiciary Committee Chairman Chuck Grassley, an Iowa Republican.
Dave Nelson, who farms near Fort Dodge, Iowa, said he has concerns that consolidation could blunt the competitive drive among big seed and chemical companies to create new products and bring them to market quickly. But he said it wouldn’t much alter how he chooses seeds and sprays.
“In this type of [poor] ag economy you’re going to see more consolidation,” Mr. Nelson said. “It’s a sign of the times.”
Write to Jacob Bunge at jacob.bunge@wsj.com