The news earlier in May was a surprise to many. Climate Corp., a subsidiary of Monsanto, announced it was terminating its agreement to sell Precision Planting to John Deere. It caught John Deere by surprise, so why did Monsanto decide to walk away from the deal, and what happens next? Penton Ag talked with two key players in this process to gain insight.
Mike Stern, CEO, Climate Corp., makes a couple things clear up front. Monsanto walked away from the agreement, but the move had nothing to do with the Bayer-Monsanto acquisition. Originally John Deere and Monsanto entered into the agreement 18 months ago, but during the process the Department of Justice filed suit against the deal.
Said Stern: "We were working diligently with Deere on that case, but it became clear to us in 2017 that we were not seeing increased clarity or a path forward that the DOJ would approve the deal."
In addition, the longer process was creating uncertainty for employees at Precision Planting "which we felt was an issue as well," Stern added.
However, John Deere was confident that it would have won against the DOJ had the companies gotten their day in court. While CNH and Kinze were contesting the acquisition, Deere management asserted that the challenge to the transaction was "based on flawed assessments of the marketplace."
John Stone, senior vice president, Intelligent Solutions Group, Deere, talked with Penton Ag about the deal and he noted that his company is "deeply disappointed in the outcome. Up until we got the notification we were confident we would have had a good acquisition if we were able to see that through to conclusion."
As for the flawed assessment, Stone explained that DOJ had taken a very narrow view of the market versus what Deere saw in terms of the position. There are millions of row units worldwide and "trying to segment one particular piece of that is not the right way to look at [the market]," he said.
Climate Corp. is a digital company with a focus on software and systems to enhance precision agriculture. The Precision Planting purchase by Monsanto gave it one area of business - parts and service - that were not part of the company's business focus. That was the original impetus for selling Precision Planting in the first place.
Since the dissolution of the agreement with John Deere, Stern says Climate is looking for another buyer. "We are talking with companies. There is a lot of interest in Precision Planting and we're in conversation with several parties about entering an agreement to sell. It would be the same package that Deere would have gotten."
While speculation on who might buy Precision Planting now may percolate across the industry, both Climate and John Deere need to move forward.
The future for Climate
One part of the John Deere deal would have been a data agreement providing Climate FieldView customers real-time access to the data stream from John Deere equipment through John Deere's Wireless Data Transfer system. Stern explained that agreement would have given FieldView customers the same in-cab connectivity, latency and fidelity as users of John Deere SeedStar Mobile would have.
Stern explained that the data connectivity agreement and its exclusivity was related to speed and frequency of data transfer - how often the info moved from machine to the cloud. It is that exclusivity that ends with this agreement termination. The move will have no impact on existing Climate FieldView customers currently using the wireless data transfer system from Deere to stream data to their account.
Stern noted that losing that real-time connectivity doesn't cause a problem for FieldView customers and the John Deere application program interface is still available. However, he noted that one tool was commercially released by Climate during the 18 month sales process for Precision Planting - the FieldView Drive.
This is a small hardware device that connects to the machine's CanBUS collecting data directly from tractor and combine and sharing that into the FieldView software. "We have all the connectivity in the FieldView Drive that we would have had with John Deere," Stern said.
He added that 70% of the data coming from FieldView Drives in the field is coming from John Deere machines too.
And while Stern noted that Climate is working to find a Precision Planting buyer, the company isn't slowing down on the digital side. He added that Smart Firmer, a new product that's gotten a lot of attention is a "great product and Precision Planting is going to have a strong year," he said. Development of new tools won't slow down.
As for the Climate digital strategy, the company recently announced the purchase of HydroBio, a Denver-based software company that focuses on water management. Further evidence that the Climate digital strategy moves forward.
Precision ag for John Deere
While Precision Planting would have brought new tech to John Deere, the company moves on with its full-line tech strategy, Stone explained.
"John Deere is undeterred and we will continue to invest heavily in the precision ag space," he explained. "We want to allow farmers to unlock new sets of value beyond planting including land preparation, fertilizing, seeding, crop care, postemergence application and harvest for analysis of next year's planting."
He noted that the company sees plenty of value to unlock through precision ag tech both "organically" with internal development and "inorganically" with potential future acquisitions.
A cornerstone of the John Deere precision ag strategy is John Deere Operations Center, which is constantly evolving for a changing market. To date, the company has 75 data partners and that continues to grow. "That number far out-strips any other group out there," Stone said. "No one is even close by an order of magnitude we have more collaborative software and farmers can get the most use out of their data on the platform."
In fact, Stone noted that more than 86,000 agricultural connected machines in the global fleet are using the Operations Center and the market is expanding in Brazil and South Africa. "It's an exciting time as we connect people, technology, equipment and insight and while we're deeply disappointed that the Precision Planting purchase didn't go through, it was just one piece of our overall precision ag strategy."