An article written by Sonja Begemann, Farm Journal’s Seeds & Crop Protection Editor, and published on August 2, 2017.
Farmers could soon feel impact from seed and input company mergers as they close. Short term, the people farmers buy their favorite seed and chemicals from could change. Ultimately, the impact could mean faster innovation, like the companies promise, or a potentially tougher market for their farmer-customers.
“Concerns about fewer choices and higher prices are on farmers’ and seed companies’ minds,” says Todd Martin, CEO of the Independent Seed Professionals Association.
One of the three planned deals has been finalized, ChemChina’s acquisition of Syngenta, which is keeping its name in the U.S. Pending final approval of the other two, Dow/DuPont and Bayer/Monsanto, three-quarters of the corn and soybean seed planted in the U.S. will be in the hands of the three entities, according to data from KG MarketSense, the North American Subsidiary of Kleffmann Group. Any required sell-offs could force some of their brands to change hands, thus giving additional market share to the acquiring company.
Asset sales might grow competition for seed and input dollars. Bloomberg says BASF and Syngenta are bidding for Bayer’s LibertyLink platform.
“In response to antitrust concerns, asset divestments will be a place farmers see consequences soon,” says Garrett Stoerger, partner at Verdant Partners. “Choices will still exist in the market, only ownership will be different. [Later], the industry will see development in how assets fit together and may need to be rationalized—pairing down brands, refocusing breeding and other redistribution.”
The reshuffling could change where farmers buy seed and inputs. As a provision of the Syngenta transaction, ADAMA, ChemChina’s U.S. subsidiary, will sell its paraquat herbicide, abamectin insecticide and chlorothalonil fungicide. Syngenta owns branded versions of the products. The sale will settle Federal Trade Commission concerns the transaction would hurt competition.
Under Dow/DuPont’s conditional U.S. approval, DuPont needs to sell the Finesse broadleaf herbicide for winter wheat and the Rynaxypyr line of products for chewing insects, which have a total of more than $100 million in combined annual U.S. sales, according to the U.S. Department of Justice (DOJ). DuPont will also divest its crop protection research and development pipeline and organization, excluding seed treatment, nematicides, and late-stage research and development programs, which DuPont will continue to develop and bring to market. DOJ says without these divestitures, the merger would likely reduce competition.
By press time, Monsanto and Bayer had approval from 10 countries. South Africa recently added its own approval, pending the divestiture of Bayer’s cottonseed and global Liberty-Link trait technology and associated Liberty branded chemical business.
“I’ve heard from many people in the marketplace they were surprised Dow and DuPont didn’t have to divest more in corn or soybean seed,” Martin says. Together, the merged Dow/DuPont will own nearly 40% of the corn and soybean seed market, according to 2016 data by KG MarketSense.
This means Mycogen, Dairyland, Pioneer, Curry and other brands on Dow or DuPont branches of the seed family tree are still owned by the pair, for now. However, divested seed and chemicals will have new owners and maybe new names within 18 months of mergers’ close.
“Divestments are usually opportunities for other companies,” says David Soorholtz, KG MarketSense managing director. “It allows smaller companies to gain assets that make them more competitive.”
American Vanguard recently signed an agreement to acquire ChemChina’s U.S. abamectin, chlorothalonil and paraquat assets. “For some time, we have been reporting that industry consolidation will result in acquisition opportunities, and this is exactly the kind of deal that we had been anticipating,” says Eric Wintemute, American Vanguard chairman and CEO.
As a condition of their merger, DuPont entered a definitive agreement with FMC Corporation to divest a portion of DuPont’s Crop Protection business, including certain research and development capabilities, and to acquire essentially all of FMC’s Health & Nutrition business. DuPont will receive $1.2 billion in cash and $425 million in working capital, which satisfies DuPont’s commitments to the European Commission.
This propels FMC to fifth place among crop protection companies in the world with $1.5 billion in revenue in 2017, according to the company.
Not just any company can fork over $1.2 billion. “Some of the assets in play are simply too large for medium sized companies to consider alone,” says Stoerger of Verdant Partners. “It’s likely you will see an exchange of these assets to other multinationals or to other large financial, private equity type groups.”
If that happens, farmers could see the big get still bigger.
If everything goes to plan, the final two deals could be completed by the end of the year. With the Syngenta/ChemChina transaction closed, the company says nothing will change for farmers in the U.S. “Syngenta remains Syngenta,” they say.
Dow/Dupont plans to close their merger in the third quarter. They have approval from U.S., Europe, China and Brazil with just a few countries left.
Bayer and Monsanto have the longest wait until potential approval but say they are confident their deal will close by the end of the year.
2016 U.S. Corn and Soybean Seed Market Share
Next year, the seed market could look substantially different as companies complete their mergers. This past year, though, market share from one company to the next didn’t change much. The data below is from KG MarketSense. Individual company data might slightly vary.
“We’ve seen changes in market share in tenths of percentage points,” says David Soorholtz, KG MarketSense managing director. “Nothing of the magnitude that will occur with the mergers on the table now.”
AgReliant Genetics Restructures Brands
Starting in 2018, AgReliant Genetics, North America’s third largest corn seed company, will go from eight representative brands to three—transitioning more than half of their brands into LG Seeds. AgReliant says this is part of a growth initiative. AgriGold brand in the U.S. and Pride Seeds in Canada will continue as they are today.
Seed brands going away and being replaced by the LG Seeds brand include Golden Acres Genetics, Great Lakes Hybrids, Eureka Seeds, Producers Hybrids and Wensman Seed. The company says it will combine the “best practices of each brand while maintaining its current employees, facilities and existing relationships.”