Delta & Pine Land (NYSE:DLP), who recently agreed to be acquired by industry heavyweight Monsanto (NYSE:MON), reported its fiscal 2007 first quarter earnings. However, given Delta's acquisition and the fact that the first quarter is one of the company's off seasons, investors and merger arbitrageurs were more interested in details of the merger proceedings.

Delta's shareholders approved the merger on Dec. 21, which negated the risk of a competing bid, and the only hurdle that remains is regulatory approval from the Department of Justice (DOJ). Because Delta is the leader in cotton seed breeding, and Monsanto is the industry leader in agricultural seeds ahead of Syngenta (NYSE:SYT), DOJ approval remains an important hurdle. In the initial merger announcement, Delta and Monsanto did not provide a transaction timeframe because of potential regulatory hurdles.

This is the second time Monsanto has made a foray at acquiring Delta. The last go-round in 1998 failed after the DOJ took more than 19 months to review the situation, prompting Monsanto to drop the bid. In response to a question about regulatory hurdles, management noted that it felt comfortable with receiving DOJ approval because new competitor Bayer (NYSE:BAY) had entered the market and caused Delta's market share to fall from 80% to 50%. Management also noted that new technologies and competition made the playing field more level.

The company is currently in the process of responding to the DOJ's second request, as expected, for more information. Should the merger fail to close, Monsanto would probably enter litigations, and should that fail, Delta would be due a $600 million fee from Monsanto.

Given the uncertainty surrounding the merger, arbitrageurs may wish to dabble in Delta's stock. At $40.45 per share, Delta's stock is trading at a 3.8% spread to the $42 per share acquisition price. If the deal closed within the first quarter, this would be a greater than 16% annualized return. However, this is far from a certainty, given the doubts voiced by industry participants and competitors that DOJ approval will be forthcoming. Furthermore, it's worth noting that the huge breakup fee provides significant downside protection and indicates Monsanto's confidence of approval. We'll see how this one plays out.

Here's some related analysis on the merger:

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above, and appreciates comments, concerns, and complaints. The Motley Fool has a disclosure policy.