Seed Executives Stress Innovation as Lawmakers Query Mergers

  • ’Tsunami’ of industry consolidation raises competition concern
  • Bayer, Monsanto officers among those testifying in Washington

Farmers worry the mergers reshaping the global seed and agricultural chemicals industry offer fewer choices, higher prices and less innovation. The companies involved counter it will help innovation not hurt it.

The two views stood in stark contrasts at a hearing held Tuesday by the Senate Judiciary Committee. Testimony came from senior executives, including two from from Bayer AG and Monsanto Co.. which last week announced a $66 billion merger. Also present were farmer groups including the National Farmers Union, which testified that U.S. growers will face fewer choices, higher prices and less innovation if the deals go ahead.

The global seed and chemical industry is undergoing a rapid consolidation, with three huge transactions announced in less than a year. In addition to Bayer’s proposed acquisition of Monsanto, China National Chemical Corp. plans to buy Syngenta AG while DuPont Co. and Dow Chemical Co. are seeking to combine and then carve out a new crop-science unit.

Consolidation ‘Tsunami’

With so many deals coming at once, regulators worldwide are asking more questions to understand the market better, which is absolutely correct for them to do, Syngenta’s Chief Executive Officer Erik Fyrwald told a Bloomberg reporter after the hearing. Still, Fyrwald said he expects approval for ChemChina and Syngenta’s deal by year-end. Other witnesses that testified at the hearing included executives from Bayer CropScience, DuPont Co., Dow Chemical AgroSciences and Monsanto Co.

"It looks like this consolidation wave has become a tsunami," Senator Chuck Grassley, a Republican from Iowa and chairman of the committee, said in his opening remarks.

Investors have speculated that the Bayer-Monsanto deal won’t pass regulatory muster, with Monsanto’s current stock price indicating only a 30 percent probability of the deal closing, according to Bloomberg Intelligence. Regulators increasingly see seeds and chemicals as interchangeable, as a means to better yields. That means overlap increases, and a Bayer-Monsanto combination would control 35 percent of the seeds and chemicals market.

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The mergers will eliminate head-to-head competition, reduce incentives to innovate and raise barriers for smaller companies, said Diana Moss, president of the American Antitrust Institute.

Monsanto Chief Technology Officer Robert Fraley said costs for bringing new products to market have soared, and the mergers will help companies pay those expenses.

“Technology advances are going to transform our industry, so we need to invest more and take advantage of breakthroughs to make more products,” Fraley said in a telephone interview. “If there are more products, there’s more competition. Size is less important than how good you can innovate.”

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