Monsanto (NYSE:MON) is branching out via a new acquisition. Investors apparently are less than thrilled about the deal, because they sent the stock down almost 7% in trading yesterday, but they may want to give this purchase some time to germinate.

The agricultural biotechnology outfit disclosed early Monday that it will buy privately held Seminis Inc., the world's largest fruit and vegetable seed developer, in a $1.4 billion transaction. Monsanto will pay $1 billion in cash for Seminis as well as assume $400 million in debt.

Evidently, the price that Monsanto is paying for Seminis is what is raising objections. As for Seminis' financial performance, the firm posted sales of $526 million in fiscal 2004 and booked a net loss of $16.3 million. Still, the Oxnard, California, company's potential for growth looks promising. Revenue grew 10.1% in fiscal 2004 from 2003, while losses were nearly cut in half. Furthermore, its fiscal 2004 loss reflects $45 million in non-cash charges.

For Monsanto, the deal is not expected to affect fiscal 2005 earnings, probably because the company does not expect the purchase to close until its fiscal third quarter, which ends in May. Free cash flow for 2005, however, is now projected to be negative $750 million versus a previous projection of positive $600 million. Nevertheless, the near-term dent in free cash flow may be well worth the benefit in the long run.

Monsanto's concentration on selling genetically altered seeds has already yielded impressive results. According to Reuters, the firm controls up to one-third of the U.S. corn seed market, if its licensing agreements covering germplasm and technology traits are taken into account. Meanwhile, the company is making progress in China and protecting its turf in South America.

Its competitors, including Bayer (NYSE:BAY) and Syngenta (NYSE:SYT) are formidable, though, and Monsanto needs to continue to diversify to stay competitive. The Seminis deal will allow it to do just that. For now, Monsanto plans to use conventional breeding to develop Seminis' seeds, but has left the door open to using its biotechnology expertise to create improved fruit and vegetable lines. Over the long term, the harvest for Monsanto could be bountiful.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.