Monsanto in Deal to Buy Rest of Calgene
In a move to expand its biotechnology and food science businesses, Monsanto Co. said Tuesday it agreed to acquire the remaining shares of Davis-based Calgene Inc. that it does not own for $240 million.
Monsanto, which owns 54.6% of Calgene, said it offered to buy the rest of the company for $8 a share, an increase from its previous offer of $7.25 a share.
For St. Louis-based Monsanto, owning all of Calgene underscores its plans to bring biotechnology further up the food chain, observers said.
Shares of Monsanto lost 50 cents to close at $37.75 on the New York Stock Exchange, while Calgene shares gained 28 cents to close at $7.84 on Nasdaq.
Monsanto is currently involved in agricultural biotechnology, developing genetically altered crops that can fight off insects and withstand the use of certain herbicides in the field. The aim of this branch of biotechnology is to help farmers increase their yields.
With the most recent deal, Monsanto gains further access to Calgene’s research in producing consumer products such as genetically modified oils, fresh produce and cotton. Natwest Securities analyst Mark Wiltamuth called this the “second wave of agricultural biotechnology.”
Monsanto has been transforming itself into a life sciences company--with agricultural, food ingredient and pharmaceutical holdings--and plans to spin off its chemical businesses later this year.
“This will promote the closer working relationships and the greater sharing of technologies that are only possible with full ownership of the company,” Monsanto Executive Vice President Hendrik Verfaillie said. “We can now better realize the benefits from Calgene’s research by combining our technology efforts and bringing products to market more rapidly.”
Calgene Chairman Lloyd Kunimoto said much of his company’s research has focused on using genetic engineering to produce cooking oils that may be healthier for consumers.
“Our strong suit is using genetic engineering to modify oil composition,” said Kunimoto, who will remain with Calgene as it becomes part of Monsanto.
Calgene’s “flagship product,” Kunimoto added, is a modified canola oil that contains at least 40% of a fatty acid called laurate, which is typically found in tropical crops like coconuts.
While this gives the laurate canola certain properties similar to cocoa butter, Kunimoto said it does not promote cholesterol in the body, a criticism of tropical oils.
Calgene’s other biotech products include fresh tomatoes and strawberries with improved flavor and shelf life, naturally colored cotton fibers and herbicide-tolerant and insect-protected cotton.
Monsanto said it will begin a tender offer for the remaining Calgene shares on Monday. It took an initial 49.9% stake in Calgene in March 1996 and purchased an additional 6.25 million shares for a 54.6% stake in November 1996.
In January, it proposed acquiring the rest of Calgene for $7.25 a share. The revised bid of $8 a share was approved by a special committee of Calgene’s directors.