Deere & Company, the farming equipment manufacturer behind the iconic John Deere tractor, agreed Thursday to acquire Blue River Technology for $305 million. John May, Deere’s president and CIO, has likened the deal to the company’s acquisition of NavCom Technology in 1999, which established Deere as a pioneer in the use of GPS technology in agriculture.

Get Our Icahn eBook!

Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below.

But its latest move represents an even bigger bet on agtech, with Blue River's machine-learning technology poised to move beyond its current use in spraying equipment to transfer farm management decisions from the field level to the plant level.

Deere's acquisition of Blue River also bucks the downward trend in agtech M&A. The recent period of record VC investment in agtech has coincided with a precipitous drop in corporate M&A in the same space over the same period. Indeed, VC investment in agtech has surpassed completed M&A deal value for two consecutive years in the US. And the wave of consolidation at the top of Big Ag—represented by the deals between Dow and DuPont (announced in December 2015), ChemChina and Syngenta (February 2016), Bayer and Monsanto (May 2016)—has played a major role in triggering that change.

Corporate M&A in agtech at historic lows

Agtech

In total, the reduction of competition between some of Big Ag's biggest companies represents over $225 billion in combined corporate consolidation—an obvious consequence of which is that the number of global players specializing in agribusiness drops from six to three. A less obvious consequence has been the chilling effect these deals have collectively had on agtech M&A since Dow and DuPont announced their historic $130 billion merger of equals in late 2015.

But the wave of consolidation at the top of Big Ag could also speed innovation along. After all, that's what the companies involved have asserted while their deals faced scrutiny from regulators worldwide over the past year or so. In that case, recent VC investments in agtech startups represent a play for liquidity that could come even sooner than expected, with an exit to one of the industry's major players becoming a more distinct possibility as Big Ag's historic deals recede into the rearview.

That means the coming next year could yield a resurgence in agtech M&A activity, in which case Deere's deal for Blue River has put it well ahead of the curve.

Blue River Technology

In 2011, Blue River's co-founder and CEO Jorge Haraud (the former head of precision agriculture at positioning technology company Trimble) and Lee Redden (a roboticist and PhD student at the time) met at Stanford University while taking Steve Blank's Lean LaunchPad course. About a year later, Blue River would raise over $3 million in financing at a $12 million valuation in a round led by Khosla Ventures. Blank himself joined the round along with Ulu Ventures and Stanford Angels. Pontifax AgTech led Blue River’s $17.5 million Series B in 2015 at a $88.6 million valuation, with co-investors including Khosla, Monsanto Growth Ventures, Syngenta Ventures, Innovation Endeavors and Data Collective. In total, Blue River raised some $30 million in VC financing.

Check out more of our agtech coverage.

Article by Adam Putz, PitchBook

Tags: