Farmers Have Qualms About DuPont, Dow Chemical Merger
12 Dezember 2015 - 12:09AM
Dow Jones News
By Jacob Bunge
Farming leaders reacted with concern to the planned merger
between Dow Chemical Co. and DuPont 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 about $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., Syngenta AG, Bayer AG and BASF SE.
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
& Co. wrote.
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.
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
(END) Dow Jones Newswires
December 11, 2015 17:54 ET (22:54 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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