Monsanto to Acquire G. D. Searle & Co. in $2.7-Billion Cash Deal
After searching nearly a year for a suitable buyer, G. D. Searle & Co., maker of the successful sugar substitute NutraSweet, agreed Thursday to merge with chemical producer Monsanto Co. in a deal worth about $2.7 billion.
The companies, which had suspended trading in their stock before the Thursday morning announcement, said in a joint statement that Monsanto would acquire Searle for $65 a share in cash. Searle would become a wholly owned subsidiary of Monsanto, which has pursued the Skokie, Ill.-based pharmaceutical company since last September.
Once trading resumed, Wall Street indicated that it liked the merger, with stock in G. D. Searle jumping $4 to $63.75; Monsanto shares were up 50 cents at $50.25.
“Searle’s skills in establishing and marketing pharmaceuticals and over-the-counter medication, together with its excellent research capability, will rapidly advance Monsanto’s timetable for becoming an important factor in the health-care industry,” R. J. Mahoney, Monsanto’s president and chief executive, said in a statement issued Thursday.
Began Discussions Last Year
Monsanto, a worldwide manufacturer of herbicides, electronic-grade silicon and man-made fibers such as AstroTurf, has long been interested in acquiring a pharmaceutical concern.
The St. Louis-based company, which had sales of $6.7 billion in 1984 and employs 50,000 people, was among several firms that began courting Searle last September after Searle officials announced that they were exploring a sale at the request of Searle family members who wanted to diversify their 34% stake in the company.
That search came at a time when Searle and other drug concerns in the $25-billion domestic pharmaceutical industry were experiencing lackluster performance as more complex testing procedures and stiffer government regulation drove up the costs of introducing new drugs, analysts said.
Although Searle’s best-known product, NutraSweet, has become the darling of the soft-drink and snack foods industries--rolling up $600 million in annual sales--some of its other highly touted products, such as its new anti-ulcer drug Cytotec, have yet to enter the domestic market. In other areas that Searle once pioneered, such as birth control pills, it no longer leads in market share.
High Profit Margins
Nevertheless, chemical concerns such as Dow Chemical and Monsanto were drawn to the pharmaceutical field because the manufacturing processes are similar to those in the chemical industry and “because the profit margins are much higher,” said Robert Uhl, an analyst at L. F. Rothschild, Unterberg, Towbin in New York.
Even so, Searle, which had $1.2 billion in 1984 sales, apparently encountered problems trying to obtain the kind of financial deal that it wanted after holding discussions last year with Monsanto as well as Pfizer Inc. and Angus Chemical Co., an affiliate of San Francisco-based Pacific Gas & Electric. In March, Searle abruptly ended its search for a possible buyer after its board unanimously agreed that the company should remain independent.
After the board’s decision, Donald Rumsfeld, Searle’s president and chief executive, released a statement saying that it was based on “the fundamental confidence we have in the future of the company.”
After that announcement, Searle family members reduced their holdings to 20% of the company’s stock by selling 7.5 million shares back to Searle, according to Searle spokesman Billy Vaughn.
Merger discussions began again this week when Searle received “an unexpected and unsolicited contract from Monsanto expressing interest in pursuing a transaction,” according to a joint statement.
The statement went on to say that Searle’s board of directors had “unanimously concluded that this transaction is in the best interests of Searle’s shareholders, employees and customers and business partners and will recommend that Searle’s shareholders tender their shares.”
TEAMING UP MONSANTO AND G.D. SEARLE Monsanto Co., based in St. Louis, is a leading chemical company with interests in agricultural products, industrial chemicals, plastics and resins, fibers, electronics materials and industrial process controls. The company has long been interested in buying a pharmaceutical concern.Financial Data in millions, for years ended Dec. 31
1984 1983 1982 Revenue $6,691 $6,299 $6,325 Net income $439 $402 $352
G.D. Searle & Co., based in Skokie, Ill., is a research-based pharmaceutical company that manufactures low-calorie sweetener products containing NutraSweet, which now account for most of the company’s profits, as well as various prescription pharmaceuticals and other consumer products. Financial Data in millions, for years ended Dec. 31
1984 1983 1982 Revenue $1,246 $946 $727 Net income $162 $151 $140