Iowa recently lost out to Delaware in its bid to get the major agricultural headquarters being formed by the merger of two mega-companies, DuPont and Dow Chemical. But Iowa will keep about 2,600 ag-related jobs that are part of DuPont Pioneer here in Johnston, thanks to the State of Iowa on Feb. 19 approving a $17 million incentive package. The Iowa Economic Development Authority held a press conference in Des Moines that day, and state officials explained the deal.

DEEP ROOTS: With the recently announced merger of DuPont and Dow Chemical Co., many Iowans were hoping the world headquarters for the new ag company would be here in Johnston under the flag of Pioneer.

For months, the IEDA, Iowa Gov. Terry Branstad and other state leaders had been looking at ways they could convince DowDuPont to keep the DuPont Pioneer business and research operation at its central Iowa location in Johnston, a Des Moines suburb. Des Moines has been Pioneer’s home for 90 years. Fields surrounding the DuPont Pioneer campus are where Henry A. Wallace did his corn breeding that led to the development of hybrid corn and the founding of the seed company in 1926, which later became known worldwide as Pioneer Hi-Bred. DuPont bought Pioneer in 1999.

Moving forward with plan to split into 3 companies
Dow and DuPont, expecting to complete their $130 billion merger this year, are moving forward with a plan to split into three companies within two years. They will be independent, publicly traded companies: an agriculture company, a material sciences company and a specialty products company.

DowDuPont announced Feb. 19 the corporate headquarters for the ag company will be in Wilmington, Del., home of DuPont’s headquarters and its deep roots in chemical research and product discovery. DowDuPont said the ag company will have two global business sites, one at Johnston, Iowa and one at Indianapolis, Ind.. Indianapolis is home to Dow AgroSciences, part of Dow Chemical.

“This structure enables the intended independent agriculture company to consolidate DuPont’s and Dow’s complete agriculture capabilities across the seed and crop protection business in three primary locations, which is integral to achieving the planned synergies,” the companies said in a press release. Both sites, Johnston and Indianapolis, will maintain research and development, and sales and marketing teams.

Preserving jobs in Iowa, no more cuts seen for now
These moves essentially leave Pioneer as it is, with the business and research operations remaining in Johnston and corporate operations in Wilmington where they’ve been since DuPont purchased Pioneer in 1999. Company officials also said Pioneer won’t see any further job reductions beyond the 10% cut in its global workforce that had already been announced by DuPont.

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“There will be some disappointment,” as Iowa won’t be the ag company’s corporate headquarters, acknowledged Paul Schickler, president of DuPont Pioneer. But keeping a presence in Iowa with the remaining units of Pioneer is “a celebration and preservation of our roots as we position ourselves for the future.” By keeping a local presence in Johnston, Schickler says the new ag company will be able to use the Des Moines and central Iowa area’s resources of science and innovation, while also maintaining close ties with Iowa farmers, many of whom are Pioneer customers.

Iowa leaders tried hard to regain Pioneer headquarters
While lawmakers in Iowa pressed hard to try to land the new company’s planned ag headquarters, so did lawmakers in Indiana. In Iowa, Gov. Branstad and U.S. Sen. Chuck Grassley and other Iowa leaders talked with executives of both Dow and DuPont. They touted Iowa’s role in agriculture, the World Food Prize headquarters in Des Moines, and the state’s universities.

The announcement that the ag company headquarters will be in Wilmington, Del., drew mixed reviews from Iowa leaders. Branstad said he’s disappointed the new company’s headquarters won’t be in Iowa but he’s proud that DowDuPont executives recognized what Iowa has to offer, adding, “We are anxious to help DowDuPont experience success in Iowa by providing a foundation to build on and a business climate that nurtures growth.”

Disappointed the new ag headquarters won’t be in Iowa
The reaction of Iowa’s two U.S. Senators was a bit stronger in expressing disappointment. Iowa Sen. Joni Ernst sent out a press release commenting on DowDuPont’s decision, saying it was “disappointing for our state, and also difficult, particularly for the hardworking Iowans who were laid off and their families.”

Sen. Grassley says in conversations he had with company executives regarding the present plan, they told him additional jobs would be created in the future in Johnston. “I’d be disappointed if that positive action doesn’t happen,” he told Wallaces Farmer in a recent interview.

The new ag company would be the nation’s largest agricultural business, surpassing Monsanto Co., currently the world’s biggest seed firm. The new ag company would be worth nearly $20 billion, based on the units’ combined 2014 revenue.

Merger still must be approved by U.S. government
Also in an interview, Sen. Ernst was asked about a merger of this size having to be approved by the U.S. government, to comply with federal anti-trust laws. Her answer, “Sen. Grassley has expressed concerns and wants to make sure the anti-trust regulations aren’t being violated. There probably will be some hearings on this merger and it will likely go through the Senate Judiciary Committee. We will keep an eye on this and other developments with the merger. We wish all the employees well with this new company, as it develops.”

Grassley, a Butler County farmer, is chairman of the Senate Judiciary Committee and a member of the Ag Committee. He released this statement on Feb. 19 immediately after DowDuPont outlined the structure and locations of the new ag company:

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“For months, the proposed DowDuPont merger has left Iowans wondering about the future of an iconic Iowa company. Today’s announcement may not be what we had hoped, but it underscores the value of Pioneer’s outstanding employees and innovative research and development. It is further evidence that the people of Iowa are again our greatest asset. I hope this new entity will continue to embrace the unique and strategic resources of Iowa and its workforce.”

Hasn’t yet decided whether to schedule hearings
In an interview, Grassley said: “I’m disappointed Iowa isn’t going to get the headquarters here in Iowa. Pioneer’s reputation goes back 90 years, and I told DowDuPont it would be wise for them to have the new ag company headquartered here if they want to be No. 1 in supplying farmers. They ought to be in the No. 1 ag state with one of the biggest, most innovative companies in agriculture. Obviously, they didn’t take my advice; they didn’t keep the headquarters here for the seed company.”

He added, “I’m glad the merged firm will be a bigger research entity and will hopefully do more research and development here. Still, I think DowDuPont is making a big mistake by not having their ag headquarters in Johnston or Des Moines.”

Grassley says he hasn’t decided whether to call for a Senate committee hearing to review the DowDuPont merger plan. He says it depends on feedback he gets from farmers, and the topic has come up in only a few of his meetings with farmers so far.

Department of Justice considers anti-trust questions
“Usually when you have fewer companies, you have less competition and more cost for farmers for the input products they buy,” says Grassley. “With this proposed merger of Dow and DuPont, there are anti-trust considerations and questions that need to be looked into and that is something for the U.S. Department of Justice to figure out.”

Grassley says he has no idea when the Department of Justice will decide to approve or not approve the Dow-DuPont merger. He says in his regularly scheduled town hall meetings he’s held in Iowa, the issue has come up a few times. People aren’t absolutely opposed to the merger, but they are concerned about the long-term effect of more big companies merging and the increasing concentration that continues to occur among large corporations.

Financial incentives approved to keep jobs in Iowa
As part of the deal to keep jobs in Johnston, the Iowa Economic Development Authority approved $17 million in incentives for the new ag company. The state is providing a $2 million forgivable loan and up to $14 million in research activities tax credits. The Johnston City Council approved $1 million in tax increment financing for the company. Polk County is expected to provide a $238,000 forgivable loan.

IEDA director Debi Durham, speaking at the Feb. 19 press conference, called the $17 million package “extremely modest.” While she and other Iowa officials wanted the global headquarters of the new ag company located in Johnston, she said Iowa still wins in maintaining Pioneer’s seed and bioscience presence here. Though the new company’s top executives will be based in Delaware, she said “key leadership decision-makers will be here in Iowa, along with the research and development teams.

“I believe the decision-making with the new ag company, as it relates to research, and the business connection to the farmer, is still going to be in our backyard,” Durham said.

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Commitment to maintaining current level of employees
The state’s tax credits apply to the “250 to 500” research and development jobs the company expects to retain in Johnston. “But it must keep at least 500 positions in order to cash-in on the full incentive package from the state,” Durham explained.

She said DowDuPont has committed to maintaining the company’s current level of about 2,600 employees in Johnston. “The company can’t go below that or they jeopardize the cash incentives. We believe right now we’re at a point of stabilization of the job losses, and this new company once it gets up and running will be poised for growth.”

DuPont Pioneer officials say the majority of DuPont Pioneer’s recent job reductions have come because of the slumping farm economy and not the merger. They say DuPont Pioneer hasn’t determined whether further employment cuts will come locally as a result of the merger with Dow. A number of agribusiness companies with operations in Iowa, including big ones like Monsanto and Deere & Co., and smaller ones such as Kinze, have all announced significant job cuts recently as a result of depressed commodity prices and plummeting farm income.