Monsanto and American Home Call Off Merger
American Home Products Corp., the marketer of such well-known consumer products as Advil, Chap Stick and Robitussin, and Monsanto Co. on Tuesday called off their planned merger, which was valued at $33.5 billion at the time of its announcement in June.
The companies offered only the barest of explanations, saying the merger was terminated by mutual consent after their boards decided that it was “not in the best interest of their respective shareholders.” But both companies’ stock prices fell substantially--American Home fell $5 to close at $45 and Monsanto dropped $13.38 to $37 on the New York Stock Exchange.
Industry analysts said the deal foundered over differences about how the combined company would be managed. The merger had already received clearance from European regulators and wasn’t expected to face major regulatory hurdles in the United States.
Rumors began circulating earlier this month about problems in consummating the deal, in part because the companies were slow to file their merger documents with the Securities and Exchange Commission.
“We have issued a rather taciturn press release on it, and I don’t think it makes a lot of sense to go into, in any depth, what I thought, let alone what anyone else thought or who said what,” said Monsanto Chairman Robert B. Shapiro.
Shapiro and American Home Chairman John R. Stafford were to have been co-chairmen of the new company, which they had hoped would be a powerhouse in the market for genetically engineered innovations in agriculture, food, pharmaceuticals and nutrition.
“Both CEOs are very well-educated, very intelligent and very capable, but they have different approaches to the business,” said Jeffrey J. Kraws, an analyst with Everen Securities. “One is a very cost-conscious, very tight control, white-shirt type of the pharmaceutical genre,” he said of the American Home management style. “The other is the more flexible management team of the ‘90s. You can have casual dress and hours.” Monsanto’s management was “not as concerned about costs and more concerned about returns down the road,” Kraws added.
St. Louis-based Monsanto’s historic strength has been in agricultural products, including its herbicide Roundup, a huge success whose sales have grown at a rate of about 20% annually.
Shapiro, who took over Monsanto in 1995, has repositioned the company from a chemical business to a life-sciences concern. In the last year it has acquired the nation’s second-largest seed company, Dekalb Genetics Corp., and Delta & Pine Land Co., which breeds and produces cotton and soybeans. It also has a promising anti-arthritis drug in the works, which it hopes to launch early next year.
American Home would have provided a tremendous help in pharmaceutical marketing, analysts had said about the deal.
Analyst Hemant K. Shah, of HKS & Co., said he expected both companies to eventually seek out other merger partners.
But Shapiro said Monsanto might not. “The merger would have allowed us to add some important capabilities, but there are other ways,” he said, including internal growth and “less comprehensive alliances.”
Before its agreement to merge with Monsanto, Madison, N.J.-based American Home Products had talked about a possible merger with SmithKline Beecham, the manufacturer of the cold medicine Contac and the antacid Tums. Those talks also fell through.
