Land O’Lakes to buy Ceres, focuses on forage development

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Land O’Lakes proposal to acquire Ceres is in keeping with current trends, says academic.

The proposed $17.2m deal was announced earlier this month and, if completed, would make Ceres a wholly owned subsidiary of Land O’Lakes. 

Ceres develops biotechnology for agricultural use and has generated and marketed new seeds and traits for feed crops, forages and other markets. It has been focusing on developing products that answer production challenges including marginal soil quality, and the need for increased yield and feed crop quality.

The proposal has been approved both by the Land O’Lakes Board of Directors and the Ceres Board of Directors, the companies said. It is predicted to be finalized in Q3 2016 and will be funded with cash on hand.

The California-based company is of interest in terms of the synergies it is said to bring to Land O'Lakes existing forage operations through subsidiary, Forage Genetics International (FGI).

"Land O’Lakes is interested in providing a holistic forage offering to our customers, including alfalfa, corn silage and forage sorghum,” said Chris Policinski, Land O’Lakes president and CEO. “The acquisition brings complementary strengths together, adds new advanced plant breeding and biotechnology to the FGI research and development pipeline and accelerates the process of bringing new forage solutions to existing and new markets.”  

Richard Hamilton, CEO and president of Ceres, said the deal would advance the biotech company's goal of making the production of meat and dairy more "scalable and sustainable".

'Trying to keep up'

Thomas Jeitschko, professor in the department of economics at Michigan State University, said the deal is not surprising given the amount of recent M&A activity in the agri-business space.  

Although proposed mergers of larger companies like Monsanto and Bayer or Dow and DuPont may gather more attention, companies like Land O’Lakes have to position themselves strategically and practically in the current market, he told us.

Industry analysts said the move shows small, profitable firms will be targets for the larger businesses that are trying to keep up with the ever increasing scale of multinationals in agri-business.

And a larger company will often enhance a small business in the additional R&D resources it brings to the table: “You might have a company with innovative researchers and good ideas, and they can do the foundation, but don’t have the infrastructure to bring [certain types of products] to market,” he said.

But there are some questions about whether the amalgamation of Land O'Lakes and Ceres would face a challenge from the regulator due to the fact there are already large companies in the space that are also looking to consolidate said Jeitschko. 

The merger might also mean fewer options for customers, he added. Generally competition among a larger group of companies in an area means more options and lower prices, said Jeitschko.

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