What Will Come From End of Deere-Monsanto Deere Remains Unclear

It has been a week since Monsanto and Deere terminated the tractor manufacturer’s purchase of Precision Planting LLC. Both companies have delivered a message of opportunity in spite of the deal’s breakdown, but details are few.

This moment was perhaps a long time in the making.

Deere agreed to buy Precision Planting from Monsanto for $190 million in 2015. In August 2016, the Department of Justice filed suit to block the acquisition, alleging that the transaction was a merger-to-monopoly in high-speed precision planting systems. The case was scheduled for trial in U.S. District Court in Chicago on June 5.

Even though Deere and Monsanto were prepared to present their case for approval, Mike Stern, chief executive officer of The Climate Corporation, a subsidiary of Monsanto Company, said the company “had to make the hard call that it just didn’t see a clear path going forward.”

“The delay in closing due to the Department of Justice concerns is what ultimately drove our decision to terminate our agreement to sell Precision Planting to John Deere,” he said.

John May, Deere’s president of agricultural solutions and chief information officer, said the company was “deeply disappointed in this outcome as we remain confident the acquisition would have benefited customers.”

Not everyone saw it that way. The DOJ called the termination “a victory for American farmers and consumers.”

Acting Assistant Attorney General Andrew Finch of the Justice Department said this: “Had this acquisition gone forward, significant head-to-head competition between Deere and Monsanto’s Precision Planting—competition that has led to lower prices and more innovative products—would have been lost.”

Case IH dealer Leo Johnson, principal of Johnson Tractor, also was happy to hear the news. “The obvious winners today are the independent Precision Planting dealers and the Case IH dealers trying to market the 2150 planters with Precision Planting components,” he said.

Minnesota Farmers Union President Gary Wertish expressed his approval, too. If the deal would have closed, he said, it would have led to more concentration and fewer choices for farmers and ranchers, which ultimately means higher prices for farmers.

With the deal dead, both Monsanto and Deere look ahead.

Stern says Monsanto has “already been in conversations with several third parties who have expressed interest in purchasing Precision Planting.” He said there has been “significant interest” from other buyers but declined to identify them.

Deere spokesman Ken Golden said the company already has equipment that is capable of doing what Precision Planting equipment can do, and it will continue to pursue its “competitive spot in the marketplace.” Golden declined to comment on whether the company would continue to build out its own capabilities or seek out new acquisitions.

Investors have speculated about whether this development will help or hurt the likelihood that Bayer’s acquisition of Monsanto will be approved. Opinions differ, but the prevailing thought is that deal will win regulatory approval.

Also terminated were the digital collaboration agreement between Deere and The Climate Corp. and an agreement that would have allowed Ag Leader to expand access to and distribution of certain Precision Planting products and technologies.

Sources: Farm Equipment, Reuters and Crain’s Chicago Business