WASHINGTON • Bayer’s pending $66 billion acquisition of Monsanto got a going-over at a Senate hearing probing concentration in the seed and farm chemical industries, with officials of the companies saying it would allow them to spend more on research and that mergers and acquisitions are necessary in a stressed farm economy.
Some senators and antitrust activists weren’t buying it, portraying the Bayer-Monsanto deal, which was announced Sept. 14, as a continuation of mega-mergers that could diminish competition and raise prices for farmers and consumers.
Two big deals affecting agriculture already are underway. Dow Chemical and DuPont, which are moving ahead with an all-stock merger valued at about $130 billion, plan to spin off their seed and crop chemical business into a separate company. And Chinese state-owned chemical giant ChemChina is proceeding with a $43 billion takeover of Swiss pesticide and seeds company Syngenta.
“The bottom line is that our industry is undergoing a healthy and sorely needed transformation,” Robert Fraley, executive vice president and chief technology officer for Creve Coeur-based Monsanto, told the Senate Judiciary Committee Tuesday. He called it a “healthy disruption.”
“Monsanto is a perfect match to Bayer’s agricultural business, combining complementary skills with limited geographic overlap,” Jim Blome, president and CEO of Bayer CropScience LP, told the committee.
But National Farmers Union President Roger Johnson pointed out that “with the downturn of the agricultural economy, the entire agriculture sector is engaged in rapid consolidation” — a trend he described as troubling.
If all three pending deals close, three companies would account for nearly 80 percent of U.S. corn seed sales and nearly 70 percent of the global pesticide market, he said, resulting in “fewer choices for farmers, higher prices and less innovation,” he said.
“Any arguments that integration is an efficiency should be viewed with skepticism,” added Diana Moss, president of the American Antitrust Institute.
Judiciary Chairman Chuck Grassley, R-Iowa, pointed out that the acquisitions come after corn prices fell from $7 a bushel in 2012 to under $3, and that overall farm income this year is expected to be well below record highs of recent years.
He said that “there is a lot of interest in how these transactions will recalibrate the seed and chemical world, and whether they’ll pass regulatory muster.”
“I am afraid this consolidation wave may have become a tsunami,” he said.
Monsanto’s Fraley said that the consolidations are necessary to respond to that lower purchasing power by farmers, as companies that supply them seed, fertilizer and pesticides seek ways to reduce overlap and inefficiencies and pivot to more research and development.
Fraley argued that licensing to smaller companies has enhanced market competition.
Fraley reiterated assertions that Bayer would have its North American headquarters and research concentration in St. Louis. But senators were unable to pin down either Fraley or Bayer’s Blome on what that might mean long-term for jobs if and when the deal goes through.
Sen. David Perdue, R-Ga., said he was worried that the Monsanto-Bayer deal puts 70 percent of seed for cotton grown in the southeastern U.S. under one company. He also said purchase by a German company could lower the U.S. tax bill currently paid by Monsanto.
Blome and Fraley said taxes were not a motivator for the deal. He said Germany, where Bayer is headquartered, is not considered a tax haven.