Monsanto to Acquire Seller of Cottonseed

Monsanto Co. on Tuesday said it agreed to buy Delta & Pine Land Co., the top U.S. seller of cottonseed, for $1.5 billion, putting aside a legal battle tied to the first attempt at a merger six years ago.

Monsanto has targeted the cotton industry as a leading growth area for its genetic modification plant technology, which has largely been focused on soybeans and corn. The acquisition of Delta & Pine would give Monsanto a dominant position with well over 50% market share.

The transaction increases Monsanto’s ability to reach cotton farmers “by pairing our technology with the industry’s most preferred seed platform in cotton,” Chairman and Chief Executive Hugh Grant told investment analysts in a conference call.

Under terms of the deal, Delta & Pine Land shareowners would get $42 a share in cash, a 16% premium over Delta & Pine’s closing stock price Monday. Monsanto said it would finance the acquisition with cash on hand and a debt offering.

Shares of St. Louis-based Monsanto rose 39 cents to $45.56 while Delta & Pine climbed $4.10 to $40.34.

Some analysts questioned the deal, including Bank of America Equity Research analyst Kevin McCarthy, who called the deal’s valuation “steep,” and deemed an acquisition of Delta & Pine as “unnecessary.”

Scott, Miss.-based Delta & Pine operates the largest and longest-running private cottonseed breeding program in the world. It had sales last year of $366 million. The company’s gross profit has seen 15% annual growth over the last three years.

Delta & Pine’s board weighed many factors in agreeing to a deal with Monsanto, including increasing competition that has driven down its market share from more than 70% to about 50%, CEO Tom Jagodinski said.

Tuesday’s announcement comes after the two rivals spent several years locked in litigation over a failed merger announced in 1998 and scuttled in 1999. Delta & Pine sued Monsanto for $1 billion when that deal fell apart and Monsanto has agreed to pay as much as $600 million under certain conditions if this deal fails. Monsanto paid $81 million when the last merger failed.