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Monsanto reaches agreement with Department of Justice to acqui


By Jennifer M. Latzke

Get out your scorecards folks, because the players in the cotton seed game just switched again.

Monsanto Company announced May 31 it reached an agreement with the U.S. Department of Justice that would allow it to complete its proposed acquisition of Delta and Pine Land Company. The $1.5 billion acquisition was completed June 1.

Under terms of the agreement, which was filed May 31 in Federal Court in Washington, D.C., Monsanto will be required to divest certain assets including its U.S. branded cotton seed business. Enter onto the playing field Bayer CropScience and Americot, Inc., which will acquire Monsanto's Stoneville and NexGen seed brands and some cotton parental lines from Delta and Pine Land.

Monsanto plans to close its acquisition and resulting divestitures as soon as possible following the required approvals from the court and the DOJ. According to a press release from Monsanto, the company is focused on closing the acquisition of Delta and Pine Land quickly and continue to deliver innovation to cotton farmers. Hugh Grant, chairman, president and chief executive officer of Monsanto Company, said, "We believe our acquisition of Delta and Pine Land will help us facilitate greater innovation within the cotton industry by accelerating the number of products available to cotton farmers and generating new value for our business."

The press release added Monsanto believes its acquisition of Delta and Pine Land will accelerate the discovery and delivery of new innovation to cotton farmers and the cotton industry. By combining Monsanto's technology with Delta and Pine Land's germplasm, cotton farmers are expected to realize enhanced benefits through the development of higher-yielding genetics and next generation technologies like water use efficiency, cotton fiber quality improvements and protection against sucking insect pests.

Stoneville traded to Bayer

In line with its agreement with the DOJ, Monsanto must sell its Stoneville Pedigreed Seed Company cotton seed brand and related business assets. Bayer CropScience has agreed to purchase these for $310 million, along with an agreement that Monsanto will also sell to Bayer CropScience certain conventional cotton parental lines that Monsanto stands to acquire from Delta and Pine Land's cotton breeding program. Monsanto will retain a non-exclusive license to these same parental lines. Bayer's FiberMax brand and the Stoneville brand will continue to be licensed to use Monsanto's cotton trait technologies.

"As part of our long-term strategy for innovation and growth, we intend to strengthen the position of Bayer CropScience in the seeds market. The acquisition of the Stoneville activities in the U.S. is a significant step in further expanding our successful cotton seed business, which forms part of our core seed crops along with canola, rice and vegetables" said Werner Wenning, Chairman of the Board of Management of Bayer AG.

A press release from Bayer CropScience explained in acquiring the U.S. assets of Stoneville, it will gain access to additional high performing cotton products with insect-resistant and herbicide-tolerant Monsanto traits. The new germplasm and the geographic reach of the Stoneville business East of Texas ideally complement Bayer CropScience's cotton seed and trait business. The acquisition will also bring in skilled and knowledgeable staff as well as state-of-the-art breeding and seed processing facilities in America.

The business to be acquired represents a turnover of about $45 million as per Stoneville's fiscal year 2005-2006.

Led by its flagship FiberMax brand, Bayer CropScience has seen its U.S. cotton seed business growing strongly over the past years. In the last two years, Bayer CropScience has acquired the assets of U.S. companies Associated Farmers Delinting, Inc. (AFD), a regional cotton seed production and processing company based in Littlefield, Texas, and California Planting cotton Seed Distributors (CPCSD), a developer, producer and distributor of high quality cotton seeds, enabling access to new regional markets in the United States and to considerable storage and processing capacities. In December 2006, Bayer CropScience also purchased the cotton assets of Reliance Genetics LLC of Harlingen, Texas.

NexGen traded to Americot

Monsanto's NexGen cotton seed brand and related business assets will be sold to Americot, Inc., for $6.8 million. Monsanto is also throwing into the deal an agreement to sell to Americot certain conventional cotton parental lines it stands to gain in its acquisition of Delta and Pine Land. Delta and Pine Land acquired these from Syngenta in 2006. The Americot and NexGen brands will continue to be licensed to use Monsanto's cotton trait technologies.

Following this acquisition Americot, Inc., Lubbock, Texas, will be the second largest cotton seed company in the Southwest region in market share and the third largest in the United States.

Terry Campbell, General Manager for Americot, said in a statement, "This acquisition of the NexGen brand of cotton seed will provide us a larger footprint in the Southwest market; it will strengthen our portfolio of high-quality germplasm available to growers in the Southwest. NexGen varieties offer High Plains growers stormproof cotton options with excellent fiber quality, high-yield potential and earliness. NexGen Roundup Ready Flex varieties are currently sold out, but there is still a good supply of Roundup Ready varieties including NG1553R, NG2448R and NG3969R.

"Additionally, the germplasm divested from Delta and Pine Land will be used to develop new cotton products under the Americot brand for the Midsouth, Southeast and the Southwest regions," Campbell continued. "This germplasm will complement our Americot cotton portfolio that includes the widely adapted AM 1532 B2RF, which is a Bollgard II/Roundup Ready variety. We will have one of the largest germplasm bases available to which we can combine with the latest and best biotechnology traits from across the world to benefit U.S. growers. We will have the freedom to stack anybody's technology traits in future varieties. In 2008, Americot will launch two new Bollgard II with Roundup Ready Flex products and three new Roundup Ready Flex products."

In accordance with its DOJ agreement, Monsanto will also be amending certain cotton licensing agreements so that its other cotton licensees have the same terms that Delta and Pine Land enjoyed with regard to the use of third-party trait technologies. And, it will provide to Syngenta certain germplasm in Delta and Pine Land's breeding pipeline that contains VIPCot trait technology. This action is intended to allow Syngenta to continue its development of this technology.

During the interim period between when the company completes its acquisition and when it completes its divestitures, the Delta and Pine Land business will operate independently of Monsanto's other commercial operations.

Monsanto has been cooperating with the DOJ regarding the proposed divestitures and is now requesting final approval of those divestitures from the DOJ under the terms of its agreement. Once the divestiture of the Stoneville and NexGen businesses has been completed, Monsanto will begin working to combine the Delta and Pine Land business into its business operations.


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