Mycogen Plans Joint Venture With Lubrizol : * Biotechnology: Proposal would help San Diego-based company develop pest-resistant crops.
Mycogen and Lubrizol Corp. on Thursday proposed a joint venture that would create one of the nation’s largest companies in the biological crop protection industry.
The joint venture will try to develop pest-resistant crops based in part on technology developed by Mycogen, a San Diego-based company that is researching and selling biopesticides. Also involved is Cleveland-based Lubrizol’s Agrigenetics subsidiary, the nation’s sixth-largest seed company. Agrigenetics is researching genetically engineered crops.
The dollar value of the joint venture could reach $139 million including cash, stock and other considerations. Terms of the deal call for Lubrizol to receive common and preferred Mycogen stock that could raise its stake in the San Diego company to as much as 33% from its current 12% holding.
The joint venture, which might be headquartered in San Diego, will create an unknown number of new jobs locally, Mycogen Chairman and President Jerry Caulder said Thursday. The Agrigenetics division would become part of the venture and would be 51% owned by Mycogen.
Analysts said the joint venture would expand the potential for Mycogen’s proprietary research into Bacillus thuringiensis , or B.t., the active ingredient upon which most biopesticide manufacturers are focusing. Mycogen has introduced products that use B.t.-based chemicals to provide protection for plants that are already growing in the field.
In contrast, Lubrizol’s Agrigenetics subsidiary has concentrated on developing genetically engineered plants that are inherently resistant to insects.
The joint venture will attempt to engineer B.t. into insect-resistant seeds that could be sold to the world’s farmers by Agrigenetics, which reported a $1.6-million net loss on $88 million in 1991 revenue.
Lubrizol is a Cleveland-based specialty chemicals manufacturer. Lubrizol said it hopes the joint venture will lead to the creation of a variety of disease-resistant crops, including sunflower and corn, that could be used to create specialty oils that the company sells to food-processing companies.
Mycogen shares closed up 75 cents at $14 Thursday in over-the-counter trading. Lubrizol closed up 25 cents at $65.50 on New York Stock Exchange trading. The deal, which must be approved by Mycogen shareholders, also must clear federal antitrust scrutiny.
“This makes Mycogen the premier company in the plant biotechnology industry,” said Jim McCamant, editor of the San Francisco-based Medical Technology Stock Letter. “This is an important deal.”
“Mycogen will come out looking awfully strong because of the critical mass” created by the planned joint venture, said George Dahlman, a Minneapolis-based industry analyst with Piper Jaffray & Hopwood.
The market for genetically engineered crops and biopesticides has been slow to develop. Mycogen’s product sales were about $4 million last year. However, advances made by Mycogen, Davis-based Calgene, St. Louis-based Monsanto and Lubrizol’s Agrigenetics “have demonstrated that (genetically engineered crops) are not really very far away now,” Dahlman said.
Calgene is now seeking regulatory approval to market a bioengineered tomato with a long shelf life. And, Monsanto is readying a cotton plant that resists insects.
The joint venture announced Thursday would be controlled by Mycogen, which last year became the first company to receive federal Environmental Protection Agency approval to sell genetically engineered microbial biopesticides. Mycogen’s initial product was introduced to control the Colorado potato beetle.
The deal would strengthen Mycogen, which reported a $3.3-million net loss on 1991 revenue of $23.6 million, analysts said. The company now has six products on sale, including two genetically engineered bioinsecticides.
