P&G; Boosts Biotech Links, Acquires Stake in Calgene

Procter & Gamble, the huge consumer products firm, has acquired an interest in Calgene, a Davis, Calif.-based agriculture biotechnology company. P&G; will invest $5 million to buy more than 700,000 newly issued shares of common stock in the company.

In addition, P&G; also acquired three-year warrants to purchase additional shares that, if exercised, would increase P&G;’s interest in Calgene to about 12%.

The investment cements an ongoing relationship between the two companies. Procter & Gamble, based in Cincinnati, Ohio, has funded some of Calgene’s work in edible and industrial oils through research and development contracts. The deal also follows other linkups between small biotechnology companies and larger companies that have established marketing and sales networks.

P&G;’s move is the first large corporate investment in Calgene, which analysts say was not in need of the cash.

George Dahlman, of Piper Jaffray & Hopwood in Minneapolis, said the investment doesn’t necessarily signal a pending takeover of Calgene by P&G;, but does give the larger company first opportunity to participate in research and development progress. “Also, if someone does take a run at Calgene, P&G; will be queued up to take a shot,” he said.

Peter Morris, vice president of research and development for P&G;, was elected a director of Calgene, increasing the number of board members to nine.

“Our investment is a vote of confidence in Calgene’s current research efforts as well as a sign of our strong interest in working with leading companies that can add value to our product lines through biotechnology,” Morris said.

P&G; said it will pay $7.025 a share for 711,744 new shares of stock. The warrants enable it to purchase an additional 355,872 shares at a price that increases annually.