Monsanto expands cottonseed presence with DPL takeover

Announced Friday, the acquisition is expected to increase innovation in the cotton industry by combining Monsanto's technology with DPL's germplasm. But in order for the merger to proceed, the US Department of Justice is forcing Monsanto to conduct a series of divestitures in order to limit the consequences of the loss of competition in the cottonseed market. The final judgment followed a civil lawsuit filed by the federal government in US District Court in Washington, which claimed that the deal would result in higher traited cottonseed prices, and also block further developments of traits for the crop. The majority of cotton grown in the US contains biotech traits. Monsanto's cottonseed sales, primarily through its Stoneville subsidiary, accounted for approximately 16 percent of the traited cottonseed sold in the US in 2006, making Monsanto one of the country's largest sellers of traited cottonseed. The firm licenses its traits to seed companies, including DPL. DPL, the largest supplier of traited cottonseed in the US, in 2006 accounted for around 56 percent of the traited cottonseed sold in the country. Last year, in the MidSouth and Southeast, DPL accounted for 79 percent and 87 percent respectively of all traited cottonseed sales. Monsanto accounted for 17 percent and 8 percent respectively. According to the Justice Department, the combination of Monsanto and DPL without any divestitures would create the largest provider of traited cottonseed in the United States and give the combined firm about 95 percent of traited cottonseed sales in the MidSouth and Southeast. This, in turn, would "substantially"​ delay or prevent the development and introduction of cottonseed containing non-Monsanto traits, said the department. As a result, in accordance with the Department of Justice Requirements, Monsanto said it has entered into a definitive agreement to sell its Stoneville cottonseed brand and related business assets to Bayer CropScience for $310m. It has also agreed to sell its sell its NexGen cottonseed brand and related business assets to Americot for $6.8m. It will be amending certain cotton licensing agreements so that its other cotton licensees have the same terms that Delta and Pine Land had with regard to the use of third-party trait technologies. It will also 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, said the firm. Monsanto, which has funded the $1.5bn Delta and Pine Land acquisition with a short-term loan, said the DPL business will operate independently of Monsanto's other commercial operations until Monsanto has completed its proposed divestitures of the Stoneville and NexGen businesses. Once the divestiture of the Stoneville and NexGen businesses has been completed, Monsanto will begin combining the business operations of Delta and Pine Land with its existing business. Cottonseed is a protein rich by-product of the textile industry, around 1.65kg of which is left over for every 1kg of cotton fiber. But because it is also high in gossypol, a toxin that causes heart and liver damage and male sterility in monogastric animals, until now this abundant protein source has remained untapped for human nutrition. At present, as much as 50 per cent of cottonseed from the US is used by the food industry, but only after it has been processed to remove the gossypol from the oil. The oil is then used in food products and for cooking - and indeed, is appreciated for its flavor - while the remaining protein-rich meal is used as livestock feed. But researchers from Texas A&M University last year reported they found a way to genetically engineer cottonseed to remove toxins, making it a potential source of protein for undernourished populations.