Deere, Monsanto Equipment Deal Faces U.S. Challenge -- WSJ
September 01 2016 - 3:05AM
Dow Jones News
By Brent Kendall and Jacob Bunge
The Justice Department on Wednesday filed a lawsuit challenging
Deere & Co.'s planned acquisition of a high-tech farming
equipment line from Monsanto Co., saying the deal would suppress
competition for technology that allows farmers to plant crops at
higher speeds.
At issue is a deal from last November in which Deere agreed to
buy Monsanto's Precision Planting equipment business. Precision has
been a leader in new technology that allows farmers to plant seeds
accurately at up to twice the speed of conventional planting
systems, which can increase growing seasons and crop yields. The
equipment can be retrofitted on farmers' current planting machines,
and is being installed on new planters built by other
companies.
Deere has its own competing high-speed technology which it is
installing on its own new planting equipment and selling in
retrofit kits.
Deere and Monsanto said they would vigorously fight the lawsuit,
calling the Justice Department's concerns misguided.
"The proposed acquisition benefits farmers by accelerating the
development and delivery of new precision equipment solutions that
help farmers increase yield and productivity," officials for the
companies said in a joint statement.
The companies said competition among high-tech planter
developers is "strong and growing" and Deere said upon completing
the deal, it would "preserve Precision Planting's independence to
ensure innovation and speed-to-market."
The Justice Department said the companies remain the dominant
providers of the technology, accounting for at least 86% of U.S.
sales. Allowing them to combine would end aggressive competition
between the two firms that has produced better deals for customers,
the department argued.
"Deere would dominate the market for high-speed precision
planting systems and be able to raise prices and slow innovation at
the expense of American farmers," said Renata Hesse, the acting
head of the Justice Department's antitrust division.
The department filed the lawsuit in an Illinois federal court,
where a judge will consider whether to block the deal.
The case is the latest from Obama administration antitrust
enforcers who have been active in opposing deals in the twilight of
their tenure.
The Justice Department is currently litigating challenges to two
major health insurance mergers: Anthem Inc. 's acquisition of Cigna
Corp. and Aetna Inc.'s deal to combine with Humana Inc. Earlier
this year, it blocked Halliburton Co. 's acquisition of
oil-field-services rival Baker Hughes.
The department also is continuing to review the proposed merger
of Dow Chemical Co. and DuPont Co.
The Justice Department lawsuit could deal a blow to Deere's
ambitions to expand its suite of high-tech farm offerings as
farmers are closely scrutinizing spending on everything from
machinery to seeds and insecticides.
Deere last year signed a string of small deals, purchasing a
French planter company and forming a joint venture centered on
farm-management software. Both are aimed at helping farmers improve
efficiency as crop prices continue to grind along at low
levels.
Monsanto acquired Precision Planting for $210 million in 2012 as
part of a broader push into data-powered farming services, hastened
a year later when the seed giant paid $930 million for the weather
modeling startup Climate Corp.
Both Deere and Monsanto are building virtual networks that
collect and sift data on farmers' crop yields, equipment use and
farm management, to formulate advice on how to grow bigger crops at
lower cost.
Alongside Monsanto's planned sale of Precision Planting to
Deere, the companies struck a concurrent agreement that would make
it easier for farmers to share data from their Deere machinery for
analysis by Monsanto's Climate unit.
That agreement is moving ahead despite the Justice Department
lawsuit. The companies have released an application for farmers
using Climate systems to get near-real-time access to data flowing
from their Deere equipment, said Mike Stern, chief executive of
Monsanto's Climate unit.
Write to Brent Kendall at brent.kendall@wsj.com and Jacob Bunge
at jacob.bunge@wsj.com
(END) Dow Jones Newswires
September 01, 2016 02:50 ET (06:50 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Deere (NYSE:DE)
Historical Stock Chart
From Mar 2024 to Apr 2024
Deere (NYSE:DE)
Historical Stock Chart
From Apr 2023 to Apr 2024