Seed Company Shake-Up: Monsanto's DPL Acquisition Just the Beginning

By Henry Gantz
hgantz@meistermedia.com

It was a blockbuster deal from the very beginning, and it was supposed to be a relatively uncomplicated marriage of Monsanto Co., the world's largest transgenic traits company, and Delta and Pine Land Co., the world's largest cotton seed company.
As an aside, 90% of D&PL's business is in the U.S.

In 1998, Monsanto began negotiations to purchase D&PL for $1.9 billion in cash. Monsanto pulled the offer in 2000, fearing regulatory approval wound not come. D&PL sued Monsanto, alleging that Monsanto had not made a good-faith effort to obtain that approval.

In August of 2006, Monsanto again announced plans to buy D&PL for $1.5 billion in cash. Upon closure of the deal, Monsanto agreed to divest itself of Stoneville Pedigreed Seed Co. and Stoneville's NexGen varieties. Under the terms of the agreement, D&PL would drop its lawsuit. The U.S. Department of Justice (DOJ) would then scrutinize the deal, but approval was expected. The only uncertainty in 2006 was the question of who would wind up with Stoneville. The bet was Bayer CropScience.

D&PL commands over half - 51% - of the Beltwide cotton seed market share, and Stoneville, at its peak, was second only to D&PL. But Bayer's FiberMax cotton varieties now hold second place, while Stoneville has dropped into third.

The DOJ's preliminary blessings came on May 31 of this year, with final approval on June 19. Also coming that day was a joint announcement by Monsanto and D&PL that the name "Delta and Pine Land" would continue, but now Monsanto's entire southern business, will include D&PL brands of cotton and soybeans, as well as Monsanto's DeKalb corn, Asgrow soybeans and Roundup-brand agricultural herbicides. The Delta and Pine Land business will also support Monsanto's seed, biotechnology and chemistry products.

If You Asked, No One Told

The circumstances of the DOJ's May 31, were earth-shaking, and included some of the best-kept secrets since Jimmy Hoffa disappeared. With almost unbelievable confidentiality, other players were involved and the deal went from blockbuster to mega-blockbuster.

On May 31, here's what happened, almost in the blink of an eye:

• Monsanto closed the deal with D&PL, but with colossal conditions.
• Those who bet Bayer would wind up with Stoneville won, although the NexGen varieties were not included. Bayer paid $310 million for Stoneville.
• In a complete surprise to most in the industry, the NexGen varieties, plus specific D&PL germplasm, went to Americot, in a $6.8 million deal. With these additions, Americot becomes the second largest seed company in the Southwest, and third largest in America.
• Syngenta, which has the VipCot insect-resistance trait, acquired 43 D&PL seed lines with VipCot that D&PL had planned to market in 2009.

Opposition to the DOJ's decision was immediate:

In a Wall Street Journal-published report:

• Justin Boyd, president of the National Black Farmers Assn. said, "(This) is not going to help the American farmer. DOJ is going to let Monsanto shove this deal down our throats."
• DuPont spokesmen Doyle Carr said the merger would limit DuPont's ability to access and compete in certain markets.
• Arkansas chief deputy attorney general Justin Allen said, "Our concern is that this will allow Monsanto ... to corner the market on certain biotechnology traits."
  Almost as quickly, Monsanto and D&PL counter punched.

"A lot of the opposition is corporate-led opposition by DuPont," said D&PL president and CEO Tom Jagodinski. "And I guess I am surprised by it. ... It clearly enables Syngenta, clearly boosts the capabilities of Stoneville/Bayer and will help Americot. From my perspective, I think a lot of it, in respect to DuPont, is sour grapes, or they have some other agenda. ... With the (DOJ) fixes that are in place, Syngenta will be in the cotton (seed) business - which is new - and with the germplasm Bayer got, they will be able to come into the Mid-South and Southeast in a big way. ... There is going to be a lot more competition; there is no question about that."

Added Monsanto spokesman Andrew Burchette, "Everything was evaluated very thoroughly by the Department of Justice. The Department of Justice has taken plenty of time to review everything in great detail. That is part of the agreement we had with them, and we believe this will ensure competition."