S. African Firm Sentrachem Accepts Sweetened Dow Bid

Dow Chemical Co. said Monday that South Africa’s Sentrachem Ltd. has accepted a sweetened bid of $495 million, paving the way for Dow to compete against Monsanto Co.’s best-selling Roundup weed killer.

Sentrachem, a producer of agricultural and industrial chemicals, had rejected Dow’s Aug. 4 bid of $445 million. The transaction would be the largest purchase of a South African company by a U.S. firm since the end of apartheid in 1994.

The move would allow Dow, whose DowElanco unit makes pesticides and other crop-protection products, to make a generic version of Roundup, the best-selling herbicide in the world, after Monsanto’s U.S. patent expires in 2000. The patent has already expired in many parts of the world.

“A large market is developing for Roundup-related chemicals, and with that product coming off patent, it’s going to invite competition,” said Douglas Groh, an analyst at Merrill Lynch.

Sentrachem is one of about 40 companies that make glyphosate, the active ingredient that goes into Roundup. Roundup commands about an 85% share of the estimated $2.5-billion market for glyphosate-based herbicides, analysts said. The global market for crop-protection products is about $30 billion.

Roundup unit sales have grown by about 20% a year over the last seven years and are likely to grow faster with the introduction of genetically altered seed that allows farmers to spray the herbicide on crops so that it kills weeds but leaves the crops unhurt.

A Monsanto spokeswoman said the company isn’t concerned about potential competition from Dow.

“We have successfully dealt with competition for the last decade in every area of the world except the U.S.,” spokeswoman Lisa Drake said. “The Dow/Sentrachem deal is intriguing, but it’s of little impact to us.”

Shares of Midland, Mich.-based Dow fell 50 cents to close at $89.31, and Monsanto dropped 50 cents to close at $44.50.