Falling commodity prices are one key reason why the merger and acquisition engine has fired up in the crop protection business. While Monsanto and Syngenta may have stepped back (at least for now) Dow Chemical and DuPont are moving ahead with their plant to become DowDupont. And while shareholders of each company may be pleased, customers are watching, and not all are pleased.
The National Farmers Union issued a scathing press release soon after the merger was announced noting the move will result in less competition, less innovation and “likely higher costs for farmes.” In the statement NFU President Roger Johnson says “the federal government has shown its willingness to approve giant acquisitions and mergers that harm competition and the result has been a year of mergers resulting in fewer and fewer choices for family farmers and ranchers. The standard against which to measure any merger is whether it will increase competition in the marketplace, and almost certainly this merger will leave us with much less, not more, competition.”
He points out having just five players remaining in the marketplace would “almost certainly increase the pressure for remaining companies to merge, resulting in even less competition.” In fact, there’s recent news that ChemChina and Syngenta may be talking again, and even Monsanto may be eyeing another run at Syngenta – or another player.
Other farm groups also issued statements in light of the merger news. Chip Bowling, Maryland farmer and president of the National Corn Growers, issued the following statement: “The National Corn Growers Association is committed to protecting the best interests of our members and our nation's corn farmers. With respect to the proposed merger, we anticipate that we will have an opportunity to submit comments regarding the effect this merger may have on agricultural research, innovation, grain marketing, and the competitive pricing of farm inputs. We will do all we can to protect farmer interests and preserve an open and competitive marketplace.”
The American Soybean Association notes it is committed to examining the overall impacts of this merger on the ag industry and soybean farmers. ASA President Richard Wilkins, Greenwood, Del., comments: “As always, we welcome competition and innovation to the industry, while keeping the best interests of soybean growers at the forefront. ASA looks forward to the opportunity to provide comments to the companies and U.S. regulatory authorities that must approve any merger, and will continue to study how this merger will affect soybean farmrs.”
The Independent Professional Seed Association also says it is looking at the situation, noting that “choice, competition and innovation drive the seed industry,” says Todd Martin, executive director, in a statement. “We at IPSA hope that choice continues to be a component of the new company.” The group anticipates the option to submit comments to both companies and regulatory authorities regarding the merger and possible impact on access to germplasm and biotech traits.
Other commentators are weighing in light of the merger announcement. A Forbes commentator looks at the change in leadership through this merger announcement, noting there are no winners when mergers replace leadership.
Of greater concern, may be a story from Fortune that takes a hard look at what will happen to the research budget in the combined company. Talk of $3 billion in savings may come mainly from research and development, and for two companies with a long history of innovation, the Fortune article says that’s not good news.
This merger will unfold over the next few months. Both companies say they target the end of 2016 to finalize the deal. The planned breakup into three divisions – ag, specialty chemicals and commodity chemicals – won’t begin until after that and could take quite some time to develop.