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DuPont in $7.7B seed deal
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March 15, 1999: 2:46 p.m. ET
Chemical firm buying Pioneer Hi-Bred, leaving rival Monsanto out in the cold
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NEW YORK (CNNfn) - DuPont Co. said Monday it will pay $7.7 billion for the rest of Pioneer Hi-Bred International, the world's biggest seed company, pushing further into biotechnology and dealing a major blow to rival Monsanto.
DuPont said it will pay $40 a share in cash and stock for the 80 percent of Pioneer it doesn't already own, seeking to boost sales of the genetically engineered seeds that are changing the way farmers in the United States grow crops. Genetically modified food and crops are facing greater resistance from consumers -- and scrutiny from regulators -- in Europe.
DuPont said Pioneer will keep its name and headquarters in Des Moines, Iowa, and that the deal will reduce its earnings per share by about 7 percent in 2000, the first full year of combined operations.
Pioneer stock jumped 3-3/4 to 38-1/16 after soaring last week on speculation about a deal, while DuPont fell 1-3/8 to 56-3/8, reflecting concerns about earnings dilution.
Pioneer (PHB) and Monsanto (MTC), bitter rivals in the seed market, are key distributors of the genes for modified crops developed by DuPont, Germany's Hoechst and other big chemical companies.
Monsanto said this month it was in early-stage merger talks with DuPont, according to published reports, but some observers said the companies have different cultures that wouldn't be a good fit. Monsanto fell 3/16 to 48-1/2.
DuPont said last week it was seeking alliances with big drug makers and would issue a new class of stock for its life-sciences business to use as currency in an acquisition.
DuPont Chairman Charles Holliday Jr. said Monday the deal will make the combined company a leader in gene-crop technology and foster products that aren't even on the drawing boards today.
"This is very early in this industry," Holliday told CNNfn. "It's like that first telephone call -- try to imagine the cell phones (of) today. We don't know exactly how it will play out, but we know the technology is powerful."
Pioneer Chief Executive Charles Johnson said the deal is a result of the two companies' work together over the past 18 months. "Our cultures fit, our visions fit, our sense of the future fits and our strengths, research and otherwise, fit, so it seemed like the natural thing to do."
DuPont's life-sciences business had sales of $4.3 billion last year, or about 17 percent of total sales of $25.8 billion. The businesses include crop protection, nutrition and health, the 20 percent of Pioneer owned since September 1997, and biotech research operations.
DuPont wants to boost earnings from biotech over the next five years from about 15 percent of its operating income last year, excluding one-time items. The company's biggest businesses are chemicals, fibers and polymers, or specialty chemicals.
The moves come as DuPont, founded in 1802 as a maker of black blasting powder, is trying to wean itself away from bulk commodity chemicals, where sales depend on economic cycles and often rely heavily on price-cutting.
Monsanto had been courting DuPont as a merger partner after incurring heavy debts in its own aggressive moves into the biotech sector. Monsanto CEO Robert Shapiro had touted the move as a way to fight the European chemical giant being created by the proposed merger of Hoechst and France's Rhône-Poulenc.
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DuPont
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