In a $1.5 billion cash transaction, Monsanto Co. announced plans to purchase the world’s largest supplier of cotton seed, Delta and Pine Land Co. (D&PL), in mid-August. St. Louis-based Monsanto and Scott, MS-based D&PL had been in on-again, off-again, on-again negotiations since 1998. Both boards of directors have approved the deal, but at the time it was announced, it lacked Justice Department approval and approval by D&PL stockholders. If the stockholders agree, they will receive $42 per share. There was no offer of Monsanto stock in exchange for D&PL stock.
Monsanto originally offered $1.9 billion in 2000, but pulled the offer, fearing that regulatory approval would not follow. Monsanto owned, and continues to own, the Stoneville brand of cotton seed — the world’s No. 2 cotton seed supplier at the time — and came to doubt it would pass anti-trust scrutiny, given the potential market share. D&PL sued Monsanto, alleging that Monsanto had not made a good-faith effort to obtain regulatory approval. The case was headed for court this fall, and it is expected to be dismissed once the deal has been approved by all involved. No time frame for final approval was announced.
Stoneville is currently the world’s No. 3 cotton seed supplier, with Bayer CropScience’s FiberMax line moving into the No. 2 spot.
Good-Bye to Stoneville?
Monsanto now says that, if necessary, it will divest itself of the Stoneville brand, but no potential buyer had emerged at the time of this writing.
Monsanto also purchased D&PL’s soybean seed business and will add the D&PL brand to its current soybean seed portfolio. Monsanto also markets corn seed.
As the world’s largest cotton seed supplier, D&PL has been one of the main vehicles for Monsanto’s Bollgard, Bollgard II, Roundup Ready and Roundup Ready Flex transgenic traits.
“Delta and Pine Land represents an excellent fit for our company as we look to bring value-added traits and high-quality seed to cotton growers around the world,” said Hugh Grant, chairman, president and CEO of Monsanto.
Added Tom Jagodinski, president and CEO of D&PL, “Monsanto is a leading products company with a strong track record of growing and integrating diversified businesses, our companies are a natural fit that will provide a complete platform of cutting edge seed technologies to our global farmer customer base for years to come.”
In a press conference on August 15, Ernesto Fajardo, Monsanto’s vice president of crop production, made the following points:
• Both Monsanto and D&PL are organizations that are 100% committed to agriculture and heavily committed to cotton.
• Both companies see the announcement as a great opportunity to pair Monsanto’s trait technologies with the strong genetics and brand offerings of Delta and Pine Land. Monsanto will combine its research and development resources and technology pipeline with D&PL’s existing strengths in breeding.
• Over the last several years, Monsanto has worked closely with D&PL and other cotton seed companies to broadly license Monsanto trait technologies to cotton farmers throughout the U.S.
“The near-term focus for D&PL and Monsanto is to make sure we serve our customers,” said Randy Dismuke, D&PL senior vice president for U.S. business. “We want to be sure cotton and soybean producers understand what this news means for them as they make decisions in real time. As the 2006 cotton season draws to a close across the Cotton Belt, cotton growers will begin to make decisions for the 2007 season. With D&PL’s long-standing commitment and reputation for supplying producers with leading cotton varieties, it’s only natural for growers to ask if they can depend on Delta and Pine Land for varieties they know and prefer. The answer is yes.
“Additionally, it is important to remember that Monsanto and Delta and Pine Land have not completed the deal,” added Dismuke. “Until this transaction is closed, Delta and Pine Land will compete aggressively with Monsanto’s Stoneville and NexGen brands, as well as all other brands in the marketplace.”