Monsanto’s latest seed company takeover and their move into biofuels

May 15, 2008

Henry Kissinger is quoted as saying, “If you control the oil you control the country; if you control food, you control the population.”

In March Monsanto agreed to acquire Netherlands-based De Ruiter Seeds Group BV, which produces seeds for the greenhouse market, for $862.7 million plus debt. Monsanto did not disclose the amount of the debt included in the purchase price.

De Ruiter Seeds, which had global sales of about $170.6 million, works with crops such as tomatoes, cucumbers, melons, peppers and rootstock.

The move comes three years after Monsanto began aggressively moving into the vegetable seed arena with the $1.4 billion purchase in 2005 of California-based Seminis, which gave Monsanto control over more than 30 percent of the North American vegetable seed market, as well as more than 20 percent of the world’s tomato seed market and more than 30 percent of the global hot pepper seed market.

Last year, Monsanto formed the International Seed Group Inc (ISG) as a holding company for the company’s growing investments in regional vegetable and fruit seed businesses.

Unlike the Seminis business, which is primarily directed at the open-field vegetable market, the bulk of De Ruiter’s business is for greenhouse growers, known as the “protected culture market,” which Monsanto said is the fastest-growing area of the vegetable seed industry today.

Monsanto’s vegetable seed business will now include De Ruiter Seeds, the “protected-culture” vegetable seed market; Seminis, the open-field vegetable seed market; and the International Seed Group, which will serve the regional seed businesses.

Strong demand for fresh produce from consumers in North America, Europe and Asia is behind the growth, Monsanto officials said.

Monsanto Chief Financial Officer Terry Crews, who serves as CEO of Seminis, said the acquisition is expected to help boost Monsanto’s vegetable seed platform into a $1 billion revenue business by 2012.

Now Monsanto is exploring the potential for biofuels.

Monsanto and the Hayward, Calif.-based Mendel Biotechnology Inc. have joined forces to study how certain prairie grasses could be transformed into biofuels.

The terms of the deal were not released. But the companies aren’t strangers. In fact, Monsanto and Mendel say that they’ve spent more than a decade collaborating on the development of “biotechnology traits” for such crops as corn, soy, cotton and canola. And the two firms bring highly complementary sets of skills to the table at a time when those skills figure to be in high demand.

The decade-old Mendel has largely operated as a research-and-development enterprise. It linked up with Monsanto as a way of eventually commercializing its technology.

Monsanto develops insect- and herbicide-resistant crops and other agricultural products. In fact, it’s a world leader. Of the 100 million acres of “transgenic” – genetically altered, or engineered – crops planted worldwide, 90% contain at least some element of “trait technology” created by Monsanto, Mendel said of its longtime partner.

Mendel Biotechnology is a plant-biotechnology company that develops products focused on both “row crops” and on so-called “cellulosic” ingredients for biofuels. Cellulosic biofuels are made from leaves, stems, stalks or other typically non-edible parts of plants, and which therefore also have the potential to expand the biofuels supply and deliver environmental benefits such as reduced greenhouse gas emissions, according to Monsanto.

In this latest partnership, the two companies will apply Monsanto’s expertise in crop testing, breeding and seed production to perennial grass seed varieties Mendel is developing for use in biofuels and other commercial applications. Cellulosic biofuels will be a key focus.

About 1% of the world’s fields – already are devoted to growing biofuels, and this figure is set to grow. Many studies question the logic of this expansion, even with oil prices at near-record levels. They point to the current concerns about global food supplies as evidence of their stance, and state that land devoted to biofuel use takes away from land normally cultivated for food production.



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