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DuPont merger Senate hearings could focus on antitrust concerns

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Antitrust experts differ on what to expect when a DuPont executive along with other agriculture leaders testify Tuesday morning before the U.S. Senate.

On the other hand, the Senate has no authority to block the proposed $130 billion merger between DuPont and The Dow Chemical Co., creating the United States’ largest agriculture market player.

“This is theater,” said Roger Dennis, dean of Drexel University’s law school and a former U.S. Department of Justice antitrust attorney. “It will be fascinating to see how the senators use the hearing and the questions they ask, but nothing of substance comes out of these events.”

But Salil Mehra, an antitrust professor at Temple University, said testimony from agriculture trade groups could raise concerns at the hearing that may factor into the Department of Justice’s review of the Dow and DuPont merger.

“There could be commentary from farmers or customers that could play into the normal procedure of the merger review,” he said.

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The U.S. Senate Judiciary Committee will hold a hearing on consolidation in the agriculture industry. James Collins, who heads DuPont’s agriculture unit, will testify. Other witnesses include Tim Hassinger, president of Dow AgroSciences, executives from Bayer, Syngenta and Monsanto, Diana Moss, president of the American Antitrust Institute and three representatives from farmer advocacy groups.

U.S. Sen. Chuck Grassley, an Iowa Republican and chairman of the Senate Judiciary Committee, announced the hearing last month. In a released statement he said the hearing will focus on how industry consolidation could impact prices.

Without knowing the exact questions senators will ask, forecasting what might be revealed during the hearing will be tricky. Delaware’s Chris Coons, a Democrat, told The News Journal in August he was going to ask about the influence activist investors had on both Dow and DuPont. Last year, DuPont defeated activist investor Nelson Peltz in a bitter, nasty proxy war. Peltz had called for DuPont breaking up into separate independent companies, a path it will follow after the consolidation with Dow is complete. Dow, meanwhile, faced similar pressure to split from Dan Loeb, the activist investor who runs New York hedge fund Third Point.

But it is unclear what other senators will ask. The 20-member committee includes some of the Senate’s heaviest hitters. Members include Republican presidential candidates Ted Cruz (Texas) and Lindsey Graham (South Carolina); Orin Hatch, a Utah Republican, and Patrick Leahy, a Vermont Democrat, who are the longest tenured senators in each of their respective parties; Dianne Feinstein, a California Democrat; and former Saturday Night Live comedian turned politician, Al Franken, a Minnesota Democrat.

Maher warned not to underestimate the role Franken could play in the hearing. During a 2014 Judiciary Committee hearing on the proposed merger between Time Warner and Comcast, Franken appeared prosecutorial as he grilled executives from both companies asking pointed questions. Franken was the Senator to explicitly state he wanted the merger blocked. He also authored three letters to regulatory agencies demanding they deny the transaction.

Within 14 months after the hearing, the deal was dead, largely because the Department of Justice announced it would recommend blocking the merger.

“The last merger I can think of that got the attention of the senate was the Time Warner-Comcast merger,” Mehra said. “Not all mergers get this kind of attention.”

Mehra said senators typically ask about consumer alternatives if prices go up as a result of the consolidation.

Dennis, meanwhile, said questions will reflect the demographics of the senator’s home district.

“This is a way for the senators to show concern for their constituents,” he said. “Grassley, for example, will show he is trying to protect the farmers.”

The Dow-DuPont deal isn’t the only high-profile merger in the agriculture market this year. Bayer AG has agreed to a $66 billion merger with Monsanto and ChemChina and Syngenta are in talks for a $43 billion deal. If all three deals are completed, the agriculture industry’s so-called “The Big Six” will become “The Big Three.”

Farmers and consumers have been concerned about the reduction in industry players. A coalition of agriculture advocacy groups demanded in June the Department of Justice block the merger between Dow and DuPont. In a strongly-worded letter, the group said the deal will reduce research and create higher prices for consumers.

Of all the agriculture mergers, Dow and DuPont are the closest to completing a deal. Shareholders of both companies approved the merger earlier this summer and regulatory reviews in the United States and Europe are already underway. The European Union, however, has halted its antitrust review to request more information on how the merger will impact competition.

DuPont spokesman Dan Turner called the delay, a “routine procedural part” of the review process. Turner said the deal is still expected to receive European approval in early 2017 and U.S. approval could come as early late 2016.

Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.

 

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