Delta And Pine Land Company Business Information, Profile, and History

Company Perspectives:

Delta and Pine Land Company looks forward to the future of agriculture and the seed industry and pledges to continue the dependable, dedicated efforts that have led American farmers to recognize us as the industry leader.

History of Delta And Pine Land Company

Delta and Pine Land Company (D&PL) is the largest breeder, producer, and marketer of cottonseed in the United States. D&PL produces conventional cottonseed and cottonseeds genetically engineered as insecticides and herbicides. The company also produces soybean planting seeds containing a gene tolerant to herbicides. The company sells its products in more than a dozen countries, deriving the bulk of its international sales from Argentina, Australia, Brazil, China, South Africa, and Turkey.

Origins

D&PL's corporate roots in the area surrounding Scott, Mississippi, were planted by a group of businessmen in Manchester, England. The businessmen, owners of private textile mills in the region surrounding Manchester, wanted to secure a reliable supply of long staple cotton to feed their mills. The mill owners were part of the Fine Cotton Spinners and Doublers Association, the organization through which they created the predecessor to D&PL. In 1911, the Fine Cotton Spinners and Doublers Association purchased 38,000 acres in the area around Scott, a sparsely populated, rural area known as the Delta and Piney Woods region of Mississippi. The mill owners were forced to divide their property into three plantations. A Mississippi law passed in 1890 restricted farming operations by a single owner to no more than 12,500 acres. Consequently, the Fine Cotton Spinners and Doublers Association formed three companies: The Mississippi Delta Planting Company, The Triumph Planting Company, and The Lake Vista Planting Company. The acreage around Scott was farmed by these three entities until the British mill owners were able to find a way to bring their property under the control of a single entity. In 1919, they discovered a dormant land company named Delta and Pine Land Company whose 1886 charter predated the law restricting farm ownership. By acquiring D&PL, the mill owners were able to operate their 38,000 acres under one company.

Although D&PL originally existed as a cotton producer, the company achieved its greatest success as a breeder of cotton planting seeds. D&PL developed into the largest such company in the United States, aided by the extensive plant breeding programs the company launched over the years. The company concentrated on producing varieties of cotton planting seed for cotton varieties grown in Arizona and east of Texas. Through its plant breeding programs, D&PL developed a gene pool capable of producing cotton varieties with superior traits that benefited both farmers and textile manufacturers. D&PL's cottonseeds could improve crop yields, a benefit to farmers, and the company's seeds could produce cotton with improved fiber characteristics, a benefit to textile manufacturers.

D&PL achieved its greatest success late in the 20th century when the company's financial might exponentially increased. Technological advancements, product diversification, and growth-minded management contributed greatly to the company's transformation. The new era of fast-paced growth began in 1978, when a group of U.S. owners led by Roger Malkin acquired D&PL. Under Malkin's leadership, D&PL made its first important diversification. In 1980, the company began marketing soybean planting seeds in the United States. The decade's most important achievement occurred later in the decade, once the company gained the executive who would lead it through its most prolific years of growth.

The Influence of Biotechnology in the 1990s

In 1988, a veteran of the agricultural seed business joined D&PL as executive vice-president. The arrival of Murray Robinson roughly coincided with the company's first concerted push overseas, a move that drew its impetus from Robinson. When Robinson joined D&PL, the company sold its cottonseed and soybean seed strictly to U.S. farmers. No one except the chief executive officer, he noted, had a passport. Robinson pushed for overseas expansion not long after joining D&PL, realizing, as he reflected in a June 11, 2001 interview with Business Week, that "for this company to grow long-term, it would have to participate globally."

Overseas sales eventually would account for a significant percentage of D&PL's financial growth, particularly during the late 1990s. Growth during the latter half of the 1990s also would be aided greatly by technological innovation, specifically by advancements in biotechnology. Although D&PL was one of the first seed suppliers to take full advantage of genetically altered seeds, the company did not develop the genetic material. Instead, the company had an invaluable partner, the giant chemicals, food ingredients, drug, and agricultural conglomerate, Monsanto Co. Based in St. Louis, Missouri, Monsanto already was deeply involved in the genetic engineering of food crops by the time D&PL was making its first steps overseas.

Plant science technology made its first leap forward in 1983, when Robert Fraley created the first genetically engineered plant, a petunia. From there, scientists in the biotechnology field went on to create genetically superior crops of corn, wheat, tomatoes, potatoes, and soybeans, among a host of other biotechnological improvements in the food supply. By the beginning of the 1990s, Monsanto was drawing attention for its work in developing pest-resistant cotton, particularly cotton that repelled bollworms and budworms. Every year, farmers in the United States used 100 million pounds of agricultural chemicals on their crops. Roughly 15 percent of the chemicals were used to kill insects, with cotton farmers ranking as the greatest users of insecticides, accounting for 40 percent of the total used on crops. Monsanto's efforts sought to reduce the use of insecticides by using a naturally occurring microbe found in soil called Bacillus thuringiensis, or B.t. B.t. produced a toxic protein lethal to budworms and bollworms, causing paralysis and death when ingested by the insect. Spraying B.t. on crops was not a viable option. The microbe washed away with rainfall and lost its insect-killing potential when exposed to sunlight, forcing Monsanto scientists to discover another way of incorporating B.t. into cotton. Researchers devised a way to take the protein gene from the microbe and insert it into the genetic structure of the cotton plant. Trials of Monsanto's genetically altered cottonseed proved successful in 1990, piquing interest. Monsanto awaited regulatory approval by the U.S. Environmental Protection Agency (EPA), hoping to begin marketing its development by 1995.

As the 1990s progressed, Monsanto became increasingly interested in biotechnology. Once a company whose mainstay business was in chemicals, the company sought to transform itself into a bioengineering concern with a focus on food and nutrition. Robert Shapiro, named chief executive officer and chairman of Monsanto in 1995, spearheaded the transformation, announcing the divestiture of the company's chemicals business and investing heavily in biotechnology interests. Shapiro's vision of Monsanto dovetailed nicely with D&PL's position as the nation's leading producer of cottonseed. In 1992, the complementary strategic orientations of the companies led to the first of several collaborative biotechnology licensing agreements. Under the terms of the agreements, D&PL was given the right to market Monsanto's B.t., or "Bollgard," gene technology. In March 1995, the two companies formed D&M International, LLC to introduce insect-resistant cotton planting seed in international markets. Later in the year, in October, the EPA completed its initial registration of the Bollgard gene technology, paving the way for commercial sales of cottonseed containing the Bollgard gene.

After years of waiting, D&PL commenced commercial sales in the United States of cotton planting seed containing Bollgard gene technology in 1996. D&PL was the only company licensed to market Monsanto's Bollgard gene technology. At this point, D&PL ranked as the largest breeder, producer, and marketer of cotton planting seed in the country, controlling roughly 40 percent of the market. The introduction of B.t. cotton strengthened an already strong company, capturing 13 percent of the U.S. cottonseed market within the first year of its introduction. D&PL's relationship with Monsanto grew in other directions as well, adding several more genetically altered products to its portfolio. In February 1996, the two companies executed what was called the Roundup Ready Gene License and Seed Agreement, giving D&PL another genetically altered cottonseed variety. Monsanto's Roundup Ready gene made cotton plants tolerant to contact with the company's most popular herbicide, Roundup. D&PL began marketing Roundup Ready cottonseeds in 1997, adding further luster to its financial growth.

By the fall of 1997, there was clear evidence of the gains achieved through D&PL's relationship with Monsanto. During the company's third fiscal quarter, sales rose 40 percent to $166 million in large part because of the success of the two Monsanto-developed products. The company's stock nearly doubled as well, jumping from a low of $20 per share in 1996 to $37.06 per share by September 1997. The year also saw the Monsanto-D&PL partnership produce a new product. In February, the two companies executed a Roundup Ready Soybean License agreement that enabled D&PL to begin marketing genetically altered soybean planting seeds. The following year, D&PL began selling cottonseed varieties containing both the Bollgard and Roundup Ready genes.

D&PL and Monsanto in the Late 1990s

The relationship between Monsanto and D&PL reached a significant juncture not long after the pair's collaboration on genetically altered seeds reached the market. In May 1998, the announcement was made that the two companies would merge, a deal that was valued initially at $1.8 billion. For 19 months, the proposed merger awaited approval by the U.S. Department of Justice. The months of waiting were in vain, as the merger collapsed, causing a furor that would drag on for months. In January 2000, roughly a month after withdrawing its filing seeking clearance from the Antitrust Division of the U.S.

Chronology

• Key Dates:
• 1911: The Fine Cotton Spinners and Doublers Association acquires 38,000 acres in the area surrounding Scott, Mississippi.
• 1919: The Delta and Pine Land Company (D&PL) is acquired, giving control of three plantations to a single entity.
• 1988: Murray Robinson joins D&PL as executive vice-president.
• 1995: D&M International, LLC is formed by Monsanto Co. and D&PL to market genetically altered cottonseed internationally.
• 1996: D&PL begins selling insect-resistant cottonseed in the United States.
• 1998: A merger between Monsanto and D&PL is announced.
• 1999: The merger with Monsanto collapses.
• 2000: Monsanto agrees to a $50 billion merger with Pharmacia & Upjohn Inc.; dissatisfied with an $81 million settlement it received after its own failed merger, D&PL files suit against Monsanto for $1 billion in damages. Department of Justice for the D&PL merger, Monsanto agreed to a $50 billion merger, completed in March 2000, with Pharmacia & Upjohn Inc., igniting D&PL's furor. "For a year and a half, we exercised every reasonable effort and a tremendous amount of time, energy, and money to make this merger happen," a D&PL executive was quoted as saying in the January 24, 2000 issue of Feedstuffs. Monsanto paid D&PL the $81 million required by the merger agreement because it had terminated the contract, but D&PL wanted far more in compensation. The company filed a lawsuit against Monsanto in January 2000 demanding compensation for damaging its relationship with its customers and for the diversion of management's time. D&PL, in the January 24, 2000 issue of Feedstuffs, demanded "not less than $1 billion in compensatory damages, as well as punitive damages in an amount to be proved at trial."
• In the wake of the litigious activity, D&PL and Monsanto continued to do business together. The benefits to each party were too great to sever all ties. By 2001, thanks to the affiliation between the two companies, D&PL enjoyed a stranglehold on the U.S. market for genetically altered cottonseed, controlling 85 percent of the market. The company's dominance in the U.S. market was impressive, but its progress overseas provided perhaps the most encouraging news as the 21st century began. Murray Robinson's vision of turning D&PL into a multinational concern had materialized, adding decided vigor to the company's financial health. D&PL sold its conventional and genetically altered cottonseeds in 16 foreign countries by the time the company's 90th anniversary arrived, gleaning the fruits of international expansion. By 2001, international sales accounted for 10 percent of the company's total revenues, and were increasing at a 35 percent annual clip. D&PL derived the majority of its international sales from countries where it maintained a presence, such as Argentina, Australia, Brazil, South Africa, Turkey, and China. For example, in China, the world's third largest cotton producer, D&PL's cottonseeds were used by more than one million farmers through joint venture companies in two of the country's 23 provinces. Thanks to the boost in sales provided by its involvement in foreign markets and to the advent of genetically altered seeds, the company recorded average annual sales growth of 20 percent between 1997 and 2000. Earnings recorded a decidedly more robust pace of growth, increasing at an average annual rate of 142 percent. Revenues by the end of 2000 reached more than $350 million. Before D&PL's genetically altered cottonseeds entered U.S. and foreign markets, annual revenues were $190 million.
• D&PL's lawsuit against Monsanto extended into 2002. If successful in its court case, the company expected to make a tremendous financial gain; regardless of the court proceedings, however, D&PL presided as the country's preeminent producer of cottonseed. In the years ahead, D&PL promised to figure prominently in the biotechnology industry, its market position posing a formidable threat to other competitors. The company had secured control of the U.S. market, leaving it to apply the same tight grip on foreign markets.