DuPont official defends merger in Senate hearing

DuPont Agriculture head James Collins said his company's $130 billion merger with The Dow Chemical Co. will not stifle competition or innovation.

"The merger is pro-competitive and good for farmers," he said in testimony Tuesday before the U.S. Senate Judiciary Committee, which held a hearing on agriculture industry consolidation.

"It creates an American agriculture leader and strong global competitor capable of increasing productivity and profitability for U.S. farmers better than either company could alone."

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

"Concerns have been raised about the loss of head-to-head competition because 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 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' ability to engage in exclusionary conduct."

Grassley described the number of industry mergers as a "tsunami."

Collins, who will head the post-merger agriculture unit, said the consolidated company will be stronger in the wake of an evolving agriculture market than as stand-alone businesses.

"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 when completed will result in the combined company being split into three separate, independent businesses.

Collins did not say whether there will be job reductions or pension cuts once the merger is completed.

"It's a little too early to focus on specifics," he said. "We will be a strong growth company."

Delaware Sen. Chris Coons, a Democrat and a member of the committee, asked about intellectual property rights. He was particularly concerned about what would happen once ChemChina, an agriculture company owned by the Chinese government, completes its $43 billion merger with Syngenta. He did ask Collins about the merger's impact on innovation.

Executives from Dow, Bayer AG, Monsanto and Syngenta along with representatives from farm advocacy groups testified. ChemChina 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.

Since December, six major agriculture companies agreed to merge, creating three global giants with a broad array of products. In addition to Dow and DuPont and ChemChina and Syngenta, Bayer and Monsanto last week struck a $66 billion deal. The three companies created through these mergers would own 80 percent of the market share of the U.S. corn seed sales and 70 percent of the global pesticide market. ChemChina and Syngenta received U.S. regulatory approval last month.

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Each deal is moving along at its own pace. The Dow-DuPont deal was approved by both companies' shareholders earlier this year and is now undergoing antitrust regulatory reviews in the United States and Europe. However, the European Union review was halted after its antitrust regulatory authority asked for more documentation on how the merger will impact competition. Dow and DuPont agreed to some concessions to appease European regulators, but did not disclose what they offered in exchange for approval. Regulatory reviews in Canada and Brazil are also pending.

The Bayer and Monsanto deal, which still needs to be approved by each companies' stockholders, is expected to face a lengthy global regulatory process. Hugh Grant, Monsanto's chief executive officer, said last week the companies will need to file in about 30 jurisdictions.

In August, ChemChina and Syngenta won U.S. regulatory approval, but could face intense scrutiny in Europe. Regulators are expected to be concerned about the consolidated company's ties to the Chinese government, an issue that came up before Tuesday's Judiciary Committee hearing. China has been criticized for what some have characterized as a lax and opaque process for approving products.

Erik Fyrwald, Syngenta's chief executive officer, said the pending merger should reduce concerns.

"China has more incentive to improve its regulatory process because it will be more invested,' Fyrwald said. "I also think they will raise their standards and the transparency of their approval process, which I think would be good for everyone."

Grassley said farmers are under tremendous pressure because the agriculture economy has slowed over the last couple years. Coupled with higher seed prices and lower corn prices, Grassley said farmers are worried.

"Farmers don't have the ability to simply raise the price of their crops when they sell them to pass on higher input costs," he said.

Jim Blome, president and chief executive of Bayer CropScience North America, testified that the Monsanto merger is necessary to help farmers meet the food demand created by a rising population.

"This type of change enables more innovation and delivers better products to the farm even faster," Fraley said.

Agriculture executives repeatedly hammered the same theme in their testimony. Each witness emphasized that their company has needs in certain markets that their merger partner can fill. DuPont and Bayer are leaders in crop protection while Dow and Monsanto are among the market leaders in traits.

"It's the perfect match," Blome said of the Monsanto deal.

Diana Moss, president of the American Antitrust Institute, said the mergers will have "potentially adverse effects that could reduce innovation, increase seed costs and raise consumer food prices. She said the Dow-DuPont and Monsanto-Bayer mergers could be particularly devastating.

"They will eliminate head-to-head competition in markets for certain crop seed and chemicals," Moss said.

Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.