U.S. sues to stop Deere from buying Precision Planting
WASHINGTON - The U.S. Justice Department filed a lawsuit on Wednesday aimed at stopping Deere & Co <DE.N> from buying Monsanto Co's <MON.N> Precision Planting farm equipment business. Deere said in a statement that it would fight ...
WASHINGTON - The U.S. Justice Department filed a lawsuit on Wednesday aimed at stopping Deere & Co <DE.N> from buying Monsanto Co's <MON.N> Precision Planting farm equipment business.
Deere said in a statement that it would fight the lawsuit, saying that the Justice Department's antitrust concerns were "misguided."
Monsanto had said in November that it would sell its Precision Planting farm equipment business to Deere for an undisclosed sum. The Justice Department complaint asking the deal to be stopped puts the transaction price at about $190 million.
Deere shares were down 1 percent at $84.82, while Monsanto's shares fell 1.4 percent to $105.88 in afternoon trading.
The Justice Department said the proposed deal would combine the two biggest makers of high-speed precision planting, which allows farmers to plant row crops like corn up to twice as fast as with conventional machinery.
In February, Deere completed its acquisition of Monosem, which also makes precision planters.
"High-speed precision planting technology holds out the promise of improved yields for American farmers by enabling them to plant crops more accurately at higher speeds," said Renata Hesse, the acting head of the Justice Department’s Antitrust Division in a press release.
"Precision Planting has been a key innovator in high-speed precision planting and Deere’s only significant competitor in developing and selling these technologies," Hesse said in a statement.
In particular, the Justice Department was concerned about Deere selling both the big machine planters themselves as well as a less expensive device sold by Precision Planting that converts conventional planters into precision planters.
"By offering farmers high-speed precision planting retrofit kits at a fraction of the cost of a new planter, Precision Planting posed a formidable challenge to Deere and its profitable sales of new planters," the Justice Department said in its complaint, asking a court to stop the proposed transaction.
With a glut of used farm equipment on the market, and many U.S. grain farmers cutting back their budgets amid stubbornly low commodity prices, both companies had been hoping the deal would tempt farmers to update equipment and buy into new farm-data services.
Farm net incomes have steadily fallen since hitting an all-time high of $123.8 billion in 2013, according to the U.S. Department of Agriculture. And there’s little sign of improvement: Farm income is forecast to fall again this year to $71.5 billion, down nearly 12 percent from 2015, according to USDA data released this week.
This is adding pressure on companies across the sector to consolidate and seek cost savings.