Monsanto Co., looking for places to grow after converting many of America's corn, soybean and cotton farms to biotechnology, agreed to buy Seminis Inc. for $1 billion in order to expand its sights to vegetables and fruit.
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Global Seed
Industry Is Growing a Monopoly Your Jan. 25 article "Monsanto Co. to Pay $1 Billion for Produce-Seed Firm Seminis" raises important issues about the potential uses of biotechnology in the vegetable seed market and the consolidation of the global seed industry. The bigger issue, however, is the fundamental question of how few companies will dominate the seed industry and thus shape the very foundation of our food system. With this acquisition, Monsanto has surpassed DuPont Co. in the global seed market. The company now owns a major portion of the corn, cotton, soybean, canola and vegetable seed markets, and only five firms — Monsanto , DuPont, Bayer, Dow and Syngenta — are major players in the global seed and agricultural chemicals industry. The monopolization of this market and the earlier hybridization of seeds have left many American farmers with higher seed costs, forcing some to purchase seeds when they would traditionally produce their own. The bottom line is a transfer of wealth from the farmers to seed companies. Will a company like Monsanto offer new opportunities for vegetable farmers, or will these produce farmers meet the same challenges as soybean and cotton farmers — bigger farms, fewer farms and intense international competition? Mary Hendrickson |
The deal for Seminis, the world's biggest produce-seed company, would be Monsanto's biggest since the late 1990s. Although the move brings little in the way of biotechnology skills, Monsanto said the acquisition would open up new growth opportunities. Seminis, which has developed crops such as the baby carrot and the personal-size watermelon through conventional breeding, controls roughly one-third of the seed used to grow the fruits and vegetables found in most U.S. supermarkets.
The acquisition pact prompted Monsanto, which also would assume $400 million of Seminis debt, to cut its forecast of earnings per share for the fiscal year ending Aug. 31 to 86 cents to $1.06, down from a previously expected range of $1.56 to $1.71 a share. The new forecast reflects charges for writing down the value of Seminis research and development efforts and for the cost of restructuring debt.
In New York Stock Exchange composite trading at 4 p.m., Monsanto traded at $54.10, off $3.62, or 6.3%.
Seminis went private in 2003 after running up big debts following an acquisition spree. The Oxnard, Calif., company generated a net loss of $16.3 million, including charges related to going private, on sales of $525.8 million in the fiscal year ended Sept. 30. Fox Paine & Co., a private-equity firm in San Francisco, paid $165 million for a majority stake in Seminis when it went private.
Seminis was cobbled together in the 1990s by Alfonso Romo Garza, a Mexican entrepreneur and Olympic horseman who hoped to become as dominant marketing vegetable seeds as Monsanto was with seeds for larger-scale crops. Seminis today controls 23% of the world's tomato-seed market, 34% of the hot pepper-seed market and 38% of the cucumber-seed market.
Executives at Monsanto, St. Louis, are playing down their interest in genetically modifying these sorts of crops anytime soon. Although U.S. consumers have largely accepted the presence in their groceries of genetically modified ingredients made from soybeans and corn, opinion research suggests that more shoppers would be leery if confronted with something they eat whole.
Still, Monsanto executives made clear that they hope to genetically modify vegetables and fruit in the future, if the market conditions are right. Seminis "makes a great platform," said Brett Begemann, the Monsanto executive vice president who will oversee the acquired company.
The planned acquisition, which allows Monsanto to leapfrog DuPont Co. as the world's biggest marketer of conventional and genetically modified seed, is a new direction for Hugh Grant, who returned the company to popularity on Wall Street since becoming Monsanto's chief executive in May 2003 by cutting costs and narrowing its focus to a handful of crops. The wheat business was jettisoned, for example. Monsanto's stock price has roughly doubled during Mr. Grant's tenure.
Monsanto already saturates much of the American grain belt. Although the European Union is lifting its de facto moratorium on genetically modified crops, the business of selling biotech seeds there will be negligible for the foreseeable future.
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