Monsanto Acquiring 2 Seed Firms
Monsanto Co. agreed Monday to buy biotech seed companies Dekalb Genetics Corp. and Delta & Pine Land Co. for about $4.3 billion total, in its latest moves to stake out a dominant position in the crop genetics industry.
St. Louis-based Monsanto said it will pay $2.5 billion, or $100 a share, for the 60% of Dekalb it doesn’t already own. Monsanto would acquire Delta & Pine, a leading cotton seed producer, in a stock swap deal valued at about $1.8 billion. Monsanto already owns 4.7% of Delta & Pine.
Monsanto, locked in a bidding war with Novartis, paid much more than expected for Dekalb, the world’s second-largest corn-seed company. Its surprising simultaneous agreement with Delta & Pine gives it two of the last remaining seed companies, raising pressure on Novartis, DuPont Co. and others trying to become leaders in agricultural biotechnology.
Monsanto’s offer is 30% higher than Dekalb’s closing price Friday of $77. Shares of Dekalb, based in De Kalb, Ill., jumped $17.25 to close at $94.25 on the New York Stock Exchange.
Shares in Scott, Miss.-based Delta & Pine dropped $6.75 to close at $46 on the NYSE, about the price at which Monsanto’s offer of 0.8625 shares valued each Delta & Pine share, or 13% lower than its Friday close of $52.75.
Monsanto gained $1.94 to close at $55.44, also on the NYSE.
The twin purchases underscore the growth potential of the emerging agricultural biotechnology industry, which by some estimates will generate $20 billion in annual sales of genetically engineered seed by 2010, up from very little today.
Dekalb and Delta & Pine provide crucial gateways through which Monsanto can introduce and distribute technology that makes crops resistant to insects and herbicides or more nutritional, whether as food or animal feed.
Dekalb is particularly important to Monsanto because the companies have jointly developed insect-resistant and herbicide-tolerant seed and share revenue from the bioengineered hybrids.
Monsanto said the Dekalb acquisition will dilute 1999 earnings per share by about 20%, and the dilution will be eliminated in four years.
