Monsanto Company (MON): The Company Splices In Its Competitors’ Best Traits

Monsanto Company (NYSE:MON) has been a busy bee lately. In March, Monsanto and E I Du Pont De Nemours And Co (NYSE:DD) settled multiple patent lawsuits against each other, instead agreeing to cross-license some of each other’s technology. Last week, Monsanto inked another cross-license deal with The Dow Chemical Company (NYSE:DOW) , and finally another with Bayer AG this week.

Monsanto Company (NYSE:MON)

Hard to tell where one ends and the other begins
Under the DuPont deal, E I Du Pont De Nemours And Co (NYSE:DD) will now pay Monsanto Company (NYSE:MON) $1.75 billion over 10 years to use Monsanto’s Roundup-ready soybean genes, which are used in about 90% of the soybeans grown in the United States. DuPont will also get to combine these genes with its own genes to create soybeans with multiple traits, which was the basis of Monsanto’s initial patent infringement suit. In return, aside from the $1.75 billion, E I Du Pont De Nemours And Co (NYSE:DD) will drop an antitrust lawsuit it had filed against Monsanto.

As for the The Dow Chemical Company (NYSE:DOW) deal, Monsanto Company (NYSE:MON) will get to license Dow’s herbicide-resistant corn, and in return, Dow gets to use Monsanto’s newest corn rootworm resistance technology, which is still in the pipeline.

It’s a good thing The Dow Chemical Company (NYSE:DOW) is getting the new version of the technology, because in 2011, researchers began noticing that the rootworms in some fields in Iowa had become resistant to Monsanto’s corn, which has a gene that essentially makes the corn a pesticide for that specific pest. The EPA now believes the resistant rootworms have spread to five other states in the Midwest. The EPA also notes that the Monsanto-resistant rootworms are more likely to develop a resistance to SmartStax, a combination herbicide-pesticide-resistant seed. So overall, this is a major headache for Monsanto, and the company has a lot riding on the new third version of its rootworm technology.

Finally, Monsanto Company (NYSE:MON) agreed to license its Roundup-ready soybean technology to Bayer for use in the U.S. and Canada, as well as insect-repellent soybeans for use in Brazil. Monsanto will gain access to Bayer’s weed and insect-control technology, to evaluate for incorporation into future Monsanto products.

Green fields ahead
All these deals mean more companies using Monsanto’s traits, but with 90% of the soybean market already, the bigger benefit is Monsanto Company (NYSE:MON)’s access to other companies’ technology, which will hopefully help it stay ahead of herbicide and pesticide resistant “superweeds” and “superbugs.”

Monsanto also recently raised its full-year earnings guidance for the second quarter in a row, now up to $4.40-$4.50 per share. At around $100 per share, that doesn’t make Monsanto Company (NYSE:MON)’s stock particularly cheap, but earnings are growing fast — net income grew by 22% in the recently ended quarter. This is one company to get on your Watchlist today, and stay updated with future developments as it continues to dominate the seed market.

The article Monsanto Splices In Its Competitors’ Best Traits originally appeared on Fool.com is written by Jacob Roche.

Fool contributor Jacob Roche and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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