Syngenta-ChemChina; Dow-Dupont; Bayer-Monsanto. Three agribusiness mega-mergers are streaking for the goal line in 2017. The only obstacles for these combinations are U.S. and European Union regulators. Will any (or all) of them make it past these watch dogs? Does Donald Trump's election make any difference?
Farmers have been wary of these mergers, fearful of paying higher prices for seeds and chemicals. At a confirmation hearing, Senator Charles Grassley of Iowa pressed Trump Attorney General nominee Jeff Sessions to promise that he would "carefully scrutinize proposed agricultural mergers and acquisitions." Sessions said he would, for whatever that's worth.
Supporters of the deals cite the staggering research, development and regulatory-approval costs of bringing products to the agricultural market. Only the biggest companies with the deepest pockets can compete, the supporters' argument goes. As they see it, the urge to merge may be regrettable but it's unavoidable.
Two esteemed former agriculture secretaries, Republican Mike Johanns and Democrat Dan Glickman, offer an interesting wrinkle on the bigger-is-necessary theory. In an opinion piece (http://tiny.cc/…). on the Morning Consult website, they make the case for one of the three mega-mergers -- the union of Dow and Dupont. Their logic? The resulting combination would be American-owned.
"Given the current landscape, now more than ever America's farmers need what Dow and DuPont are proposing -- a strong, focused American agriculture company that is American-owned, championing the interests of the American farmer in a marketplace that may soon be dominated by foreign-owned behemoths," Johanns and Glickman write.
It's easy for Americans to sympathize with the desire for a national champion ag company. It's harder to articulate why American ownership matters to American farmers.
No nation has farmers that spend more on seed, chemicals and other supplies than the U.S. Will Monsanto really start ignoring the American ag market simply because it has a German corporate parent? Will Swiss-based Syngenta change its approach to the U.S. market as a result of being acquired by the Chinese? Chrysler is owned by Italy's Fiat but its Ram trucks are very much aimed at Americans. For that matter, DTN is currently owned by a French company, Schneider Electric.
That said, there is a strong reason other than nationality of ownership for regulators to look kindly on the Dow-Dupont merger. According to a press release the two companies issued last July, "DuPont and Dow intend that, following the consummation of the merger, the combined company will pursue the separation of the combined company's Agriculture business, Material Science business and Specialty Products business into three independent, publicly traded companies, subject to approval by the DowDuPont board and receipt of any required regulatory approvals" (http://tiny.cc/…).
In other words, instead of being part of a big chemical conglomerate serving pharmaceutical, industrial and other markets, the Dow-DuPont combination will give birth to a company focused entirely on agriculture. As Johanns and Glickman put it, "By coming together, they intend to then create a single, independent, U.S.-based and -owned pure agriculture company capable of competing effectively against their still larger global peers."
When times are tough in ag land, a "pure agriculture company" won't be as tempted to redirect investment dollars to other product lines. It won't have other product lines.
Will this logic win the day with regulators? They may be able to sell the deal to Trump if they make big enough promises to create new jobs in the U.S. The president is preoccupied with seeming to create new American jobs. The two companies likely have the president's ear: Trump has named Andrew Liveris, Dow's chief executive, head of the administration's manufacturing council, an advisory group (http://tiny.cc/…).
The bigger, more immediate stumbling block is the European Union. The EU's trust busters have expressed "serious doubts" about the deal. The two companies have worked hard to assuage those doubts. As of this writing, the EU hasn't made a final announcement (http://tiny.cc/…).
Given the Trump administration's America First instincts, the Europeans may well be asking themselves a new and troubling question: If we block Dow-DuPont, will the U.S. block mergers of European companies in retaliation? Stand by for news. This could get interesting.
Urban Lehner can be reached at email@example.com
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