-----Original Message----- From: NLP Wessex [mailto:[EMAIL PROTECTED]] Sent: Sunday, November 14, 1999 1:22 PM To: Undisclosed.Recipients Subject: Monsanto etc life sciences on life support Thanks to NGIN for this. NATURAL LAW PARTY WESSEX [EMAIL PROTECTED] www.btinternet.com/~nlpwessex ======================================== >Posted: Sunday, November 14, 1999 | 6:14 a.m. > >Monsanto faces its many options > >By Robert Steyer >Of The St. Louis Post-Dispatch > > >It's becoming clear that Robert B. Shapiro's vision exceeded >his company's coffers and Wall Street's patience. > >Investors, analysts and some Monsanto Co. insiders believe >Monsanto's chairman soon will make a deal that will >dramatically alter his goal of >engineering a life sciences company. A deal could come >within a few weeks or a few months. > >Shapiro didn't invent the term "life sciences company," >which describes the melding of nutrition, biotechnology, >crop protection and medicine under one corporate roof. > >But he has been the most passionate proponent, even as more >well-heeled competitors have vacillated. > >Now, it appears Shapiro may wave the white flag with some >transaction -- merger, sale, spin-off, joint venture -- that >will cut back on Monsanto's ambition. > >"I think the old concept of life sciences is on life >support," said William Fiala, an analyst for the Edward >Jones brokerage. > >Fiala and other analysts, who have followed Monsanto's >transformation from a traditional chemical company, said >Shapiro is being pressured by some events beyond his >control. > >He is being roughed up by the quick-score behavior of big- >time money managers who control about 80 percent of >Monsanto's stock. "Once that pressure starts, you can't >afford to have the institutional investors dumping their >stock," said a former Monsanto executive who requested >anonymity. > >"Many people look at life sciences as providing some sort of >short-term dividend, but that's never been the case," said >Sano Shimoda, president of BioScience Securities, in Orinda, >Calif., an agribusiness research firm. "Life sciences is a >long-term strategy." > >Several bigger companies -- such as DuPont and Novartis -- >have the money to carry on the life sciences concept if >Monsanto gets carved up. But these companies still view life >sciences as a collection of components rather than as a >unified business that weaves together all of the units. > >"Monsanto is the professor; the other companies are the >students," >Shimoda said. "Monsanto is the leader in creating this >vision, and it >put its money where its mouth was." > >But Monsanto gagged on its heavy spending -- about $8 >billion worth of transactions between 1996 and 1998, >including one deal still pending. > >Shapiro's desire to buy seed companies stretched Monsanto's >balance sheet and weakened its stock price, despite big >revenue infusions from the herbicide Roundup and, this year, >from the arthritis drug Celebrex. > >Seeking to finance his vision, Shapiro talked to many drug >and chemical companies before embarking on an ill-fated >merger plan with American Home Products Corp. last year. > >Monsanto is talking to many companies now, and Shapiro has >often said that everybody in this business talks to >everybody else. > >"This time, it's for real," said a former Monsanto >executive. After the American Home merger collapsed 13 >months ago, Monsanto moved quickly to create a financial >recovery strategy. It issued stock and debt and started >divesting assets. Monsanto's credit ratings barely budged >downward, but investors continued to snipe. > >Meanwhile, Shapiro failed to build the enhanced-nutrition >component of his life sciences dream. While Monsanto's >president, he was the point man for the $1 billion purchase >in late 1995 of Kelco, a maker of food ingredients. > >Kelco never blossomed. Monsanto almost shut down its >alginate business - food ingredients derived from brown >seaweed - before selling it at a bargain price. The bigger >part of Kelco, the biogums ingredient business, is for sale. >So is the rest of the consumer products division, including >the artificial sweetener NutraSweet. > >Monsanto's stock price has never reached the levels it >enjoyed during the American Home courtship. > >The stock has climbed about 20 percent in little more than a >week thanks to rumors of impending deals and to a three-way >slugfest among giant drug companies. > >Investors are betting on a new round of drug industry >consolidation, >figuring Monsanto will be engulfed by it. Monsanto has been >urged by some analysts to sell or spin off its drug >subsidiary, G.D. Searle & >Co. in the name of shareholder value. > >At the same time, several Monsanto peers are pulling back on >the >agricultural part of their life sciences strategy. > >Novartis, DuPont and American Home are firing employees in >their crop protection divisions. American Home, Novartis and >AstraZeneca are hinting at sales or spinoffs of their crop >units. > >As competitors struggle, Monsanto's farm products division >is outperforming them during a worldwide agriculture slump. > >Given the complications in the food and farm arenas, >analysts can't agree on what Monsanto will do next. What >deal makes economic sense, supports research and rewards >shareholders? > >Merging with DuPont or Novartis would trigger anti-trust >alarms; the deals would put a lot of seeds in few hands. >Spinning off Searle would fetch a nice price, but would >leave Monsanto vulnerable as long as the farm economy >remains depressed and biotechnology is controversial. > >Merging with a drug company would not solve the farm or >biotech issues. Pfizer, for example, likes Searle but has no >interest in agriculture. >Resurrecting an American Home-type deal is always possible. >The merged company could then spin off the agriculture units >as a separate entity - but it might not yield much of a >price. > >There are plenty of reasons - unrelated to drugs or crops - >why analysts expect Monsanto to make a big deal soon. >Accounting rules are expected to be revised by the end of >2000, repealing or scaling back existing rules that offer >tax advantages for mergers. > >Analysts also believe that Shapiro, 61, doesn't have a >successor to forcefully promote his vision. They say >Monsanto's president Hendrik >Verfaillie is a competent manager with strong agriculture >expertise, >but they say he is not the ringmaster for the multi-faceted >life sciences show. > >"An independent Monsanto is gone because the former vision >as we knew it is gone," said a long-time Monsanto watcher on >Wall Street. "There's not enough glue to hold life sciences >together under one company. You can expect more alliances in >the future for pieces of life sciences." > >Still, some people cling to the notion of Monsanto as an >independent company. "Sure, it could happen but there would >be tremendous risk," said Shimoda, the agribusiness analyst. >The risk is a depressed stock price and prospects of >shareholder suits. The risk will remain as long as protests >against biotech crops create uncertainty among consumers, >farmers and investors. > >Monsanto has been staggered by the virulent reaction of >European consumers, politicians and, ultimately, food >company customers against genetically engineered foods. > >Overseas protests, foreign food labeling laws and Europeans' >vows to avoid bioengineered foods have worked their way back >to the United States. American farmers, who have >embraced biotech crops, now wonder how much cotton, >soybeans, canola and corn they should buy for the next >planting season. > >Even if biotech crops help them cut costs of using chemicals >to kill >weeds and insects, they don't know if they can find adequate >markets for these crops. Despite efforts by trade groups and >companies to alleviate these fears, experts say many farmers >will wait longer than usual to make seed-buying decisions >this year. > >Right now, Shapiro's vision is in the hands of the highest >bidder. >Analysts expect Monsanto could fetch a price of at best $55 >a share, or about $10 a share better than Friday's closing >price. > >Many people who question some of Monsanto's tactics and fret >about its stock price still find time to praise Shapiro's >vision. > >"The manipulation of food and the work with genetics just >may be way too early (for investors to embrace)," said Alex >Hittle, who follows the life sciences industry for A.G. >Edwards & Sons. "Twenty years down the road, we might take >the pieces of Monsanto and put them back together again." > > ========= > >STAY INDEPENDENT AND MAINTAIN ITS STRATEGY > >PRO: Monsanto keeps intact its life sciences vision and >retains its >impact on the community. > >CON: The company risks stock price beating, analyst >opposition and >shareholder lawsuits. Option provides no protection against >chronic >crop biotech protests and doesn't accelerate debt-cutting >efforts. > >MERGE WITH A DRUG/CHEMICAL GIANT > >PRO: Monsanto relieves its debt burden, and provides >marketing money and muscle. The company maintains research >money. > >CON: Control over research goals is cut, unless deal is true >merger of equals. Monsanto's corporate identity weakens. >Culture issues emerge, and the move could spark layoffs. > >SELL THE WHOLE COMPANY > >PRO: The benefits are similar to a merger: Monsanto relieves >its debt burden, and provides marketing money and muscle. >The company maintains research money. > >CON: Severe job cuts result, especially if deal is hostile. >Control >over research ends; Monsanto's corporate identity is erased. >Community/philanthropy efforts are hurt. Tax consequences >are more severe. > >MAKE A DEAL WITH A BIG BIOTECH COMPANY > >PRO: A joint venture/merger with Genentech, Biogen, etc. >keeps research aim on farm and pharmacy efforts, adds >marketing clout to biotech firms and offers better tax >benefits than a sale. > >CON: High-leveraged, high research-spending companies are >combined. The move doesn't offer quick debt relief, doesn't >solve crop biotech albatross and raises questions of whose >vision prevails. > >SPIN OFF SEARLE AS AN INDEPENDENT COMPANY > >PRO: Gives a quick cash infusion to cut debt, offers a home >for the drug unit, provides better tax deal than selling >Searle, and calms investors and analysts -- at least for a >while. > >CON: The move kills vision of life sciences, chokes off big >profit-producer in Celebrex arthritis drug, leaves >farm/biotech unit >isolated and puts Monsanto in play for takeover. > >PARTNER WITH ANOTHER COMPANY > >PRO: Move could relieve some financial pressure. Partners >could combine marketing forces, whether the deal is with >Monsanto or just Searle. The move offers a better tax deal >than outright sale. > >CON: A joint venture requires a clear understanding of who's >in charge. This option's track record is mixed in life >sciences. Corporate culture and layoff issues could emerge. >
