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Monsanto (MON) Affiliate Divests Precision Planting Business

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Monsanto Company’s business subsidiary — The Climate Corporation — recently divested its Precision Planting LLC equipment business to AGCO Corporation (AGCO - Free Report) , for an undisclosed amount.

Inside Story

In 2015, Monsanto had agreed to sell its Precision Planting business to Deere & Company (DE - Free Report) , for nearly $190 million. However, The Justice Department prosecuted to block the deal last year, due to the heightening competition in the global seed trails and agricultural chemical industry.

In late July 2017, Climate Corporation inked an agreement with AGCO to spin-off its Precision Planting business. The deal’s success ensures that Precision Planting LCC will complement AGCO’s equipment portfolio and assist in the development of advanced crop-yield enhancing products for farmers in the near term.  

Climate Corporation is also in the process of reinforcing its global-data connectivity contract with AGCO. This agreement will ensure sound connectivity between Climate Corporation’s FieldView digital agro-platform with AGCO’s equipment. The deal will likely increase farmers’ accessibility to useful data, which will help measure the outcomes of agronomic decisions and managing inputs.   

Existing Scenario

There is an ongoing trend of consolidation in the contemporary seed, trails and agricultural chemical industry. This drift has been making matters worse for Monsanto, intensifying competitive pressure for the company. Furthermore, dismal pricing conditions in the agricultural market and foreign currency translation impact remain major causes of concern.

Nevertheless, elevating demand for crop-yield enhancing products, strong innovation and the success of Bayer AG’s (BAYRY - Free Report) buyout deal, likely to close by the end of this year, are anticipated to bolster Monsanto’s top- and bottom-line performance over the long run.

Monsanto’s shares have yielded a return of 9.8% compared with 7.5% growth recorded by the industry, in a year’s time.

The company currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank  (Strong Buy) stocks here.

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