After a year and a half of trying to get the deal to sell Precision Planting to Deere & Co. done, on May 1, Monsanto threw in the towel and said that it was terminating the agreement. The acquisition, which was announced in November 2015, was opposed by the U.S. Department of Justice based on complaint from a competing manufacturer of farm machinery in August.
As a result, the closing had been delayed by the DOJ’s concern with the transaction to preserve competition in the market for high speed precision planting systems in the U.S. In all likelihood, other, possibly larger, issues also played into Monsanto’s decision.
Deere and Monsanto issued separate press releases announcing the cancellation on May 1. Deere said it was “deeply disappointed” that the agreement fell through.
The company said, “Two agreements related to Deere’s purchase of Precision Planting will also be terminated, including the digital collaboration agreement between Deere and The Climate Corp., a division of Monsanto. Also ending is an agreement that would have allowed Ag Leader to expand access to and distribution of certain Precision Planting products and technologies.”
According to the release issued by The Climate Corp., a subsidiary of Monsanto, “The Climate Corp. made the strategic decision nearly 18 months ago to focus its business exclusively on its digital agriculture platform and this strategy has not changed.”
The press release went on to say, “The company intends to sell the Precision Planting equipment business and has spoken with several third parties that have expressed interest in purchasing it.”
Mounting DOJ Hurdles
It appears that attorneys for Monsanto and Deere weren’t getting a lot of traction in the case to justify the acquisition.
According to a April 26 report in Law360, the companies’ attorneys were not allowed to get the names of the people that the DOJ expert interviewed as part of the suit to block Deere’s acquisition of Precision Planting from Monsanto. The U.S. district judge said he wouldn’t force the DOJ’s expert witness to turn over notes she took during interviews with growers and equipment dealers in preparation for the trial, which was set for June 5, 2017. Government attorneys argued the notes weren’t pertinent to the report.
The companies said they only wanted the names of the people interviewed so they could verify what she said they told her, not her actual notes. “If the names were all you needed, you should’ve flagged that from the beginning,” the judge said. “It’s an untimely request.”
The Bayer-Monsanto Deal
Another factor that may have also contributed to Monsanto’s decision to terminate the sale of Precision Planting is the fact that it’s also busy working to complete Bayer’s acquisition of the company, which is the “bigger fish” compared to the sale of Precision Planting. It’s quite possible that Monsanto no longer wanted to be fighting with the DOJ on two fronts, especially as the ag business has been in the doldrums for more than 3 years.
Another thing that probably played a role in the decision is how Bayer views what needs to be done with Monsanto when the acquisition is finally approved. According to a Reuters report, on April 28, Bayer’s CEO, Werner Baumann told shareholders at the company’s annual general meeting that he will face an uphill battle to improve Monsanto’s reputation. “Monsanto’s image does of course represent a major challenge for us, and it’s not an aspect I wish to play down," he said.
“Yet we are facing this challenge with all those qualities that have made us what we are today: openness, expertise and responsibility," Baumann added.
The Monsanto name has been linked to a number of controversial products, including Agent Orange, PCBs and glyphosate. Its leadership in the development of genetically modified organisms (GMOs) also has been a source of criticism, especially in Europe, where there is strong opposition to genetically modified products.
Bayer and Monsanto plan to wrap up the $66 billion transaction by the end of 2017. As part of this, Bayer aims to file for European antitrust approval during the second quarter, according to the Reuters report.
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