Government Challenges Deere-Monsanto Merger

CHICAGO (CN) — The Justice Department sued agricultural giants Deere & Co. and Monsanto to stop a planned merger between Deere and a Monsanto subsidiary that the government says would create a monopoly.

Deere plans to acquire Precision Planting LLC for $190 million to curtail competition to its high-speed planting technology.

In 2014, Precision introduced the SpeedTube system weeks before Deere came out with its ExactEmerge product. Both systems "enable farmers to plant seeds at substantially higher speeds," the government's lawsuit states.

According to the complaint filed Wednesday in Northern Illinois Federal Court, the planter is "a critical piece of farming machinery" and the new technology allows farmers to plant crops at up to 10 miles per hour, twice the speed of a conventional system with the same accuracy.

While Deere sold its new technology "bundled into new planters," Precision offered its system "as a set of components that could be purchased at a relatively low cost and retrofitted onto existing planters," the complaint states.

That gave Precision a pricing advantage, since retrofitting a planter costs about one-fifth of the $150,000 a farmer would pay for a new Deere planter.

Although Deere eventually came out with its own retrofitting system, Precision "posed a formidable challenge to Deere and its profitable sales of new planters."

After Precision partnered with a Deere competitor to factory-install SpeedTube on its planters, a Deere executive allegedly said he could not "state more emphatically how much of a threat this news is."

Deere estimated that if it bought Precision from Monsanto, it could avoid cutting its own prices by 5 to 15 percent, and, according to the government, "with control over the pricing, quality and availability of Precision Planting's technology, Deere would control the availability of this 'gamechanger' to farmers."

With 2015 ExactEmerge sales at $900 million and SpeedTube's at $100 million, the companies shared 86 percent of the market for high-speed planting equipment.

The other two companies in the market do not use comparable technology, making Deere and Precision "the only two meaningful providers of high-speed precision planting systems in the United States," according to the Justice Department.

The government says that if Deere took control of Precision, it "would end the competition that exists today...and that would otherwise continue and expand as adoption of this emerging technology increases," violating antitrust laws.

Ken Golden, Deere's director of public relations, said in a statement that the "DOJ's allegations about the competitive impacts of the transaction are misguided and the companies intend to defend the transaction vigorously."

"When the transaction is finalized, Deere will preserve Precision Planting's independence in order to ensure innovation and speed-to-market and will invest in additional innovation efforts at Precision Planting to benefit customers," Golden said.

The Climate Corporation, the Monsanto division selling Precision, "continues to believe that the sale of Precision Planting to Deere & Company will be beneficial to farmers," CEO Mike Stern said in a statement.

"Deere & Company and The Climate Corporation plan to defend the transaction on its merits," Stern said.

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