Monsanto Reportedly in Merger Talks
Monsanto Co., continuing its search for a buyer, is talking to Pharmacia & Upjohn Inc. about a merger that would create a drug company with products ranging from arthritis pain relievers to smoking-cessation gum, a person familiar with the situation said Friday.
The two companies are still far apart on key issues, said the person, who spoke on condition of anonymity.
Monsanto Chief Executive Robert Shapiro put the company up for sale more than a year ago, and has come close several times to clinching a deal.
But while many drug makers want to buy Monsanto’s drug division, which makes the lucrative arthritis drug Celebrex, few of those buyers also want Monsanto’s pesticide and agricultural chemical business, which is being shunned in Europe because of concerns about genetically modified foods.
Monsanto, based in St. Louis, could still choose to split its Searle drug unit and its agricultural division into two companies, however that would trigger higher taxes, making that option less appealing.
The boards of the two companies are scheduled to meet over the weekend, though it was unclear whether a vote is expected, according to the Wall Street Journal, which first reported the talks Friday.
Investors and analysts seemed to take Friday’s report with a grain of salt.
On the New York Stock Exchange, Monsanto shares rose $1.38 to close at $41.75, while shares in Peapack, N.J.-based Pharmacia fell $3 to close at $50.25.
Monsanto’s agricultural-chemical business has been a drag on the company’s stock, which is off 18% from its high this year.
Just weeks ago, Monsanto held discussions with Swedish drug maker Novartis, but the two companies couldn’t agree on the price.
Monsanto also held fruitless discussions with DuPont after the collapse last year of Monsanto’s merger agreement with American Home Products Corp.
Monsanto has spent more than $8.5 billion on acquisitions to build up its agricultural division, according to Mergerstat, a researcher. But the value of those assets has been hurt by the backlash against genetically modified foods.
The synergies with Pharmacia are clear. Together, Monsanto and Pharmacia would have a better distribution system and a bigger research-and-development budget.
One of Searle’s main strengths is treating arthritis. It has three drugs--Arthrotec, Daypro and the blockbuster Celebrex, which is co-marketed with Pfizer Inc. and which eases pain while causing less damage to gastrointestinal systems than many of its competitors.
Pharmacia & Upjohn was formed as a result of the 1995 merger of Sweden’s Pharmacia with the U.S.’s Upjohn Inc. Its products include Nicorette gum to help people stop smoking, the anxiety drug Xanax, the pain drug Motrin and Rogaine for hair loss.
