Justice Department Rules Against Deere Acquisition of Precision Planting09/01/2016
The Justice Department on Wednesday filed a lawsuit challenging Deere & Co.’s planned acquisition of a high-tech farming equipment line 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 agreed to buy Monsanto’s Precision Planting equipment business. Precision has been a leader in new technology that allows farmers to plant seeds accurately at up to twice the speed of conventional planting systems, which can increase growing seasons and crop yields. The equipment can be retrofitted on farmers’ current planting machines, and is being installed on new planters built by other companies.
Deere has its own competing high-speed technology which it is installing on its own new planting equipment and selling in retrofit kits.
Deere and Monsanto said they would vigorously fight the lawsuit, calling the Justice Department’s concerns misguided.
“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.
The companies said competition among high-tech planter developers is “strong and growing” and Deere said upon completing the deal, it would “preserve Precision Planting’s independence to ensure innovation and speed-to-market.”
The Justice Department said the companies remain the dominant providers of the technology, accounting for at least 86% of U.S. sales. Allowing them to combine would end aggressive competition between the two firms that has produced better deals for customers, the department argued.
“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,” said Renata Hesse, the acting head of the Justice Department’s antitrust division.
The department filed the lawsuit in an Illinois federal court, where a judge will consider whether to block the deal.
The case is the latest from Obama administration antitrust enforcers who have been active in opposing deals 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.
The Justice Department lawsuit could deal a blow to Deere’s ambitions to expand its suite of high-tech farm offerings as farmers are closely scrutinizing 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 improve 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.
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 concurrent agreement that would make it easier for farmers to share data from their Deere machinery for analysis by Monsanto’s Climate unit.
That agreement is moving ahead despite the Justice Department lawsuit. The companies have released an application for farmers using Climate systems to get near-real-time access to data flowing from their Deere equipment, said Mike Stern, chief executive of Monsanto’s Climate unit.