April 3, 2017

 

 

The US National Farmers Union (NFU) has called on the Trump administration to block the merger between Dow Chemical Co. and DuPont Co., saying it would create the largest biotechnology and seed firm in the US and reduce competition.

 

"The reduction in competition that would be wrought by a Dow-DuPont merger will result in less innovation, higher prices, and less choice for farmers," NFU President Roger Johnson said in a letter to President Trump. "Given the damaging and lasting effects this merger will have on family farmers and rural America, we urge you to oppose this merger".

 

Johnson noted that the Dow-DuPont merger occurs amidst a "massive wave" of consolidation in the agricultural inputs sector. "The combination of the two companies, coupled with the concurrently proposed mergers of Bayer-Monsanto and ChemChina-Syngenta, threatens to limit major players in the agrichemical and seed sectors to just four companies".

 

Johnson claimed that the merger of Dow and DuPont, the fourth- and fifth-largest chemical firms in the world, respectively, would give the resulting company-DoDuPont-about 41% of the market for corn seeds and 38% of the market for soybean seeds.

 

"If the Dow-DuPont and Bayer-Monsanto mergers were both approved, there would effectively be a duopoly in the corn and soybean seed markets", Johnson said.

 

Johnson noted that the merger would limit choice in the marketplace for farmers and that it would likely diminish innovation competition, or reduce the incentive to develop new products.

 

"Dow and DuPont biotechnology pipelines contain overlapping input and output traits in development for corn, soybeans and cotton, as well as crop protection," said Johnson. "Innovation is key to farmers and ranchers' ability to increase crop production and improve crop quality. Without standalone competition between Dow and DuPont incentivizing innovation, farmers' profits and consumers' access to affordable food are at risk."

 

Game of 'musical chairs'

 

While Dow and DuPont agreed to sell some of their key research and development assets, he said it was highly likely that many of those assets would be bought by companies among the Big 6. "Therefore, any reallocation of share within the large incumbents through divestitures would only result in a game of market concentration 'musical chairs'".

 

A week ago, or on March 27, the European Commission conditionally approved the proposed merger of the two US-based chemical companies Dow and DuPont.

 

The approval is conditional particularly on the divestiture of major parts of DuPont's global pesticide business, including its global R&D organisation.

 

Dupont said it would divest its Cereal Broadleaf Herbicides and Chewing Insecticides portfolios; and its Crop Protection research and development pipeline and organisation, excluding seed treatment, nematicides and late-stage R&D programs, which DuPont will continue to develop and bring to market, and excluding personnel needed to support marketed products and R&D programmes that will remain with DuPont.

 

Additionally, on February 2, 2017, Dow announced an agreement with SK Global Chemical Co. Ltd. to divest its global Ethylene Acrylic Acid (EAA) copolymers and ionomers business. These divestitures are conditioned on Dow and DuPont closing their merger transaction, in addition to other closing conditions including regulatory filings, local employment law and governance.

 

DuPont is also currently in negotiations to divest the crop protection assets.-Rick Alberto