Justice Department Challenges Deere's Planned Deal With Monsanto--2nd Update
01 September 2016 - 3:09AM
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 line of high-tech
farming equipment 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 said it
agreed to pay an undisclosed sum to buy Monsanto's Precision
Planting equipment business.
The Justice Department said Monsanto's equipment line had been a
leading innovator in high-speed planting technology, with Deere as
its only significant competitor.
"If this deal were allowed to proceed, 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
who rely on these systems," said Renata Hesse, the acting head of
the Justice Department's antitrust division.
The department filed the lawsuit in an Illinois federal court,
asking a judge to block the deal.
Deere and Monsanto said they would vigorously fight the lawsuit,
calling the Justice Department's concerns misguided and saying that
the companies had cooperated fully with the U.S. antitrust
review.
"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. They said competition among
high-tech planter developers is "strong and growing" and that their
deal would benefit farmers by speeding the development of new
planting equipment, some of which could be used to retrofit older
machinery and save farmers money.
Deere said upon finalizing the deal, it would "preserve
Precision Planting's independence to ensure innovation and
speed-to-market."
The case is the latest from Obama administration antitrust
enforcers who have been particularly active 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.
Agricultural giants such as Monsanto, Deere, DuPont and Cargill
are jockeying with venture capital-powered startups to capture a
growing stream of data flowing off U.S. farms, enabled by
cutting-edge combines and planters that collect detailed
information on seeding rates and crop yields. Data-powered products
and services are one way for agricultural companies to offset
slumping sales in their core business lines.
Some farmers are looking to sensors and big-data services as a
way to trim costs as a multiyear slide in commodity prices has U.S.
farm incomes on track this year to hit their lowest point since
2009, according to the U.S. Department of Agriculture.
The Justice Department lawsuit could deal a blow to Deere's
ambitions to expand its suite of high-tech farm offerings as
farmers are sharply scrutinizing their 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 maximize 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. Since then Monsanto has expanded
Climate's range of algorithm-powered advisory services and struck
data-sharing agreements with software developers and farmer
cooperatives.
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 connectivity agreement that would
make it easier for farmers to link their Deere machinery with
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
August 31, 2016 12:54 ET (16:54 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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