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Monsanto, AHP call it off
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October 13, 1998: 11:57 a.m. ET
American Home, Monsanto cancel $34B merger; governance issues cited
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NEW YORK (CNNfn) - American Home Products Corp. and Monsanto Co. said they have mutually agreed to terminate their $34 billion merger, marking the largest deal ever to fall apart.
Although the companies acknowledged the deal was canceled by "mutual consent," many analysts said corporate governance was the major hurdle in completing the merger, which was announced on June 1.
The agreement had called for Monsanto shareholders to get 1.15 shares in the new company for each share held, valuing the stock at about $55 a share.
The news prompted a sharp sell-off in Monsanto's stock (MTC), which lost 11-1/8 at 39-1/4 while American Home stock (AHP) was down 3-1/8 at 46-7/8. Both issues were halted for trading by the New York Stock Exchange.
The original pact also called for American Home Products to pay Monsanto a $700 million break-up fee should the deal collapse. But Madison, N.J.-based American Home said the latest arrangement entails no break-up fee for either company.
In a separate statement, St. Louis-based Monsanto said both boards determined the deal wasn't in the best interest of shareholders.
Based on the original agreement, the new corporate headquarters were to be located in American Home Products' hometown with only the agricultural business in St. Louis. American Home's Chief Executive John Stafford and Monsanto's Chairman and Chief Executive Robert Shapiro were to share the top two spots.
But even though dual offices was a "nice story to sell at the beginning," it was difficult to execute, said Jeffrey Kraws, analyst at Everen Securities.
"The more the two companies discussed co-heads, the more difficult it became," Kraws said.
To allay some concern, Monsanto executives told analysts during a conference call it still expects third-quarter earnings to hit current estimates of 13 cents a share.
But despite the damage control, Monsanto's stock in October had plummeted 16 percent prior to Tuesday's plunge.
(Click to see recent stock activity)
Officials also said the company plans to issue debt and equity securities in the future for its long-term financing purposes. Monsanto needs to sell securities to finance four pending acquisitions of seed companies worth billions of dollars. 
-- from staff and wire reports
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