Christopher Doering, and Kevin Hardy

DesMoines

Iowa lost out to Delaware in its bid to secure a major agricultural headquarters being formed by the merger of mega-companies DuPont and Dow Chemical — the culmination of a months-long push to strengthen the state's prominent role in U.S. agriculture.

But the state will keep roughly 2,600 jobs that are part of DuPont Pioneer in Johnston, after signing off on a $17 million incentive package for the chemical giants.

Dow and DuPont, which are expected to complete their $130 billion merger later this year, plan to split into three companies within two years — agriculture, material sciences and specialty products.

Dow-DuPont announced Friday that the corporate headquarters for the agriculture company will be in Wilmington, Delaware, home to DuPont's headquarters and its deep roots in product discovery.

In addition to Johnston, the agricultural operations also will retain a presence in Indianapolis, Indiana, home to Dow Agrosciences, part of Dow Chemical.

The moves essentially leaves Pioneer as it is, with the business operations staying in Johnston and the corporate side remaining in Wilmington, where it has been since DuPont purchased Pioneer in 1999, officials said.

The companies also said Pioneer won't see any further job reductions beyond the 10 percent cut in its global workforce that had already been announced by DuPont, which amounted to about 175 jobs in Johnston.

"There will be some disappointment," Paul Schickler, president of DuPont Pioneer, acknowledged, but keeping a presence in Iowa is “a celebration and preservation of those roots as we position ourselves for the future."

By keeping a local presence in Johnston, Schickler said the company will be able to tap into the area's rich background of science and innovation, while also maintaining close ties with Iowa's farmers, many of whom who are customers of Pioneer.

Lawmakers in Iowa, as well as in Indiana, mounted a full-court press to grab the ag headquarters, with Gov. Terry Branstad, Sen. Chuck Grassley and others talking with executives of both companies. They touted Iowa's role in agriculture, the World Food Prize and the state's universities.

Friday's announcement drew mixed reviews from those same Iowa lawmakers.

Branstad said he was "proud" that executives recognized what Iowa has to offer, adding: "We are anxious to help Dow-DuPont experience success in Iowa by providing a foundation to build on and a business climate that nurtures growth.”

But Sen. Joni Ernst called the decision "disappointing for our state and also difficult, particularly for the hard-working Iowans who were laid off and their families."

Grassley said Friday that during conversations with company executives he was led to believe that additional jobs would be created in Johnston.

"I'd be terribly disappointed if that positive action didn't happen," he said.

The Iowa Republican, a Butler County farmer and chairman of the Senate Judiciary Committee, said he hasn't decided whether to call for a hearing to review the Dow-DuPont merger. That will depend on feedback he gets from farmers, a topic that so far has come up in only a few of his meetings back in Iowa, he said.

Incentives to keep jobs

As part of the deal to keep Johnston's jobs, the Iowa Economic Development Authority approved $17 million in incentives for the new company Friday. The state offered a $2 million forgivable loan and up to $14 million in research activities tax credits.

The Johnston City Council approved $1 million in tax increment financing for the company at a specially called meeting Friday afternoon. And Polk County is expected to provide a $238,000 forgivable loan.

IEDA Director Debi Durham characterized the $17 million package as "extremely modest."

While she and other officials wanted the global headquarters, she said Iowa still wins in maintaining its seed and bio-science presence in Johnston. Though executives will be based in Delaware, she said "key leadership decision-makers" will be in Iowa, alongside existing research and development teams.

"I believe that decision-making as it relates to research and … that connection to the farmer is still going to be here in our backyard," she said.

The state's tax credits apply for the 250 to 500 research and development jobs the company expects to retain in Johnston, though it must keep 500 positions to cash in on the full incentive package from the state.

Durham said the company has committed to maintaining its current level of about 2,600 employees in Johnston.

"They can't be below that or obviously they jeopardize the incentives on the cash side," she said. "We believe right now we’re at a point of stabilization, and now we’re at a point poised for growth."

For its part, DuPont Pioneer says the majority of its cuts recently have come because of the slumping farm economy and not the merger. The company has not determined whether further cuts will come locally as a result of the consolidation.

Monsanto, Deere & Co. and Pioneer have all announced job cuts as a result of depressed commodity prices and plummeting farm income.

A history of incentives

Iowa has made more than a dozen awards offering some $60 million in incentives to DuPont companies since 1998, state records show. The company has claimed or continues to cash in on about $28 million in tax credits and forgivable loans, excluding Friday's award.

"This is a company that has really figured out how to extract resources from taxpayers. And it just continues on," said Iowa State University economist Dave Swenson.

Swenson, a frequent critic of Iowa's economic development incentives, questioned whether the company was actually threatening to pull its research jobs from Johnston, given its massive investments here over the years and central Iowa's cluster of bioscience companies and researchers.

He said the DuPont deal is evidence that the state lacks a coherent economic development strategy.

Swenson said he saw a similar misstep in the state's recent decision to award nearly $5 million to Kraft-Heinz, which after its merger will build a new production facility in Davenport — but may cut as many as 900 jobs. In such cases, it's difficult to tell how influential the incentives were, Swenson said, and whether a company would have fled without them.

"Everybody is insulated from reality," he said. "And the reality is that firms have the upper hands on gullible economic development organizations and states in these kinds of negotiations. There are very few states willing to play chicken and say, 'No.'"

IEDA officials insist the incentives were crucial in retaining jobs.

"We knew Pioneer wasn’t going to up and close down shop. That was clear from the beginning," said Tina Hoffman, an IEDA spokeswoman. "But keeping or getting the global business center that is the base for all this R&D for the ag bio-science company, that’s what was really potentially in question. So that’s why you see us talking about those specific jobs. Because that’s what specifically could have gone to Indianapolis or Delaware."

Chad Hart, an Iowa State University agricultural economist, said many in the state who lobbied for the headquarters expected Dow and DuPont to pick Indianapolis or Johnston.

“The company went a third direction that I don’t think ether Iowa or Indiana expected,” he said. “We lost to somebody we didn’t know was even in the race.”

While the location of the headquarters out of state might not mean job losses, it increases the chances that corporate executives in Delaware could decide to make changes that might not have happened if both operations were in Iowa.

“It brings more uncertainty into the future,” he said.

Johnston officials optimistic

But Friday, Johnston officials were hopeful that the local operation would grow once the merger is finalized.

DuPont Pioneer makes up about 40 percent of the city's taxable commercial valuation and 9 percent of the overall taxable valuation, officials said.

Pioneer traces its history in central Iowa to 1926, when Henry A. Wallace founded the Hi-Bred Corn. Co., renamed a decade later as the Pioneer Hi-Bred Corn Co. Wallace was the U.S. secretary of agriculture and vice president in Franklin D. Roosevelt's administration.

Johnston Mayor Paula Dierenfeld downplayed the loss of the headquarters, pointing instead to the research and development positions that will stay.

"I think it basically leaves us in essentially in the same place we are right now, with the opportunity to grow in the future," she said.

As the world's population demands more and healthier food, the result of a growing population, burgeoning middle class and improved dietary and nutritional standards, Schickler pronounced that there is "no doubt about it, growth is going to be in front of this agricultural company."

The new ag company would be the nation’s largest agricultural business, surpassing Monsanto Co., the world’s biggest seed operation. The new business would be worth nearly $20 billion, based on the units’ combined 2014 revenue.

Contact Christopher Doering at cdoering@usatoday.com or reach him at Twitter: @cdoering

How the states lined up

Here's a look at the incentives offered from the three states competing for the headquarters of Dow-DuPont's new ag company:

Delaware: Offered a strategic fund grant worth $9.6 million over five years. Part of that amount includes $3.6 million the company will receive for the creation of 400 jobs. Other strategic fund grants were awarded in the form of matching up to 3 percent of the company’s capital expenditures up to $6 million, which would require the company to spend at least $200 million in the state over a five-year period to receive the full amount.

The new ag company will be headquartered in Wilmington, currently the home of DuPont.

Indiana: Officials offered no retention incentives up front, instead focusing on performance-based incentives the company could be eligible for if they create jobs going forward.

Indianapolis will become a "global business center" for the new company though the company has not said what effect the change will have on the 1,400 employees at the existing Dow AgroSciences, which specializes in crop protection and seed products.

Iowa: Offered $17,238,000 in state, city and county incentives to the company. Officials say the incentives assure that the company will more or less maintain current staffing levels of about 2,600 in Johnston. But much of the state incentives are tied to the 250 to 500 research and development jobs the company expects to retain.

Johnston will also become a "global business center," keeping research and development, sales and marketing teams, and business support functions.

Sources: The News Journal, The Indianapolis Star, Iowa Economic Development Authority