DuPont exploring agricultural deals with Syngenta, Dow Chemical

DuPont exploring agricultural deals with Syngenta, Dow Chemical

9:57 AM, 9th November 2015
DuPont exploring agricultural deals with Syngenta, Dow Chemical

NEW YORK, US: Some of the world’s largest agricultural companies are looking to combine with one another as three years of shrivelling crop prices have pressured profits, in what would be the industry’s first big shake-up in at least a decade.

Syngenta AG is discussing with DuPont Co a potential combination with DuPont’s agriculture division. DuPont is also separately discussing a potential alternative agriculture deal with Dow Chemical Co which is exploring a sale of its seed and pesticide unit.

Executives have publicly signalled their interest in consolidating, without being specific. Edward Breen, who became DuPont’s interim chief executive on 16 Oct following the departure of Ellen Kullman, said he has been discussing deals with his counterparts.

“Everyone is talking to everyone,” said Andrew Liveris, CEO, Dow Chemical on a conference, when his company announced it is exploring deal possibilities for its agriculture division.

US farm income is on pace to hit its lowest level in nearly a decade, pressuring profits in the global market for genetically modified seeds and chemicals to kill weeds and insects. The manufacturers also face growing challenges from pests developing resistance to commonly used products, along with mounting consumer scrutiny of crop chemicals and biotech seeds.

Inexpensive debt, competitive pressure to secure merger partners and other factors has fuelled a broader deal boom that has put 2015 on pace to be the biggest year on record for mergers and acquisitions.

Farmers were enjoying a prosperous period thanks in part to increased crop demand from expanding livestock and biofuel industries, which helped sharply increase farm income and enabled seed-and-pesticide makers to secure handsome margins for their products.

A combination of Syngenta with DuPont’s agriculture unit would control about 27 percent of global pesticide sales. Analysts say such a combination may require the divestment of Syngenta’s US seed business to smooth antitrust concerns, as DuPont already controls 35 percent and 33 percent  of the US corn-seed and soybean markets, respectively.

DuPont and Dow’s agricultural operations combined would control about 17 percent of the global market in pesticides, becoming a close No 3 behind Syngenta and Bayer.

Most agriculture executives say that big crops and low commodity prices are likely to continue, barring a major drought or pest outbreak, deepening challenges for farmers and the companies that supply them.

©The Wall Street Journal 



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