Monsanto, P&U see "top tier" EPS growth after 2000
By Ransdell Pierson
NEW YORK, Feb 1 (Reuters) - Merger suitors Monsanto Co. <MTC.N> and Pharmacia & Upjohn Inc. <PNU.N><PHU.ST> said on Tuesday their planned combined company would likely achieve annual earnings per share growth of more than 20 percent after 2000, putting them in the industry's "top tier."
Only a few other U.S. drug makers are expecting comparable earnings growth, including New York-based Pfizer Inc.<PFE.N> and Warner-Lambert Co. <WLA.N>, which makes and co-markets with Pfizer the cholesterol-fighter Lipitor.
Officials of P&U and Monsanto on Tuesday together gave upbeat presentations to investors and analysts at a series of meetings in New York, amid some skepticism their merger plan will garner sufficient shareholder support.
"Their forecasts of over 20 percent earnings growth after 2000 was soothing, with a good part of it coming from cost savings," said Corey Davis, a Chase Hambrecht & Quist analyst.
Davis said the earnings forecast also soothed investors, who bid up the stock prices of both suitors. Shares of P&U closed up 1-13/16 to 48-13/16, while those of Monsanto rose 3-1/8 to 38-7/16, both on the New York Stock Exchange.
Despite the rally, some investors remain skittish about the proposed merger. Sam Isaly, a principal of OrbiMed Advisors in New York who holds shares of Monsanto, said he was angry that Monsanto spurned an earlier bid of $49 per share from an unidentified non-U.S. company.
Monsanto disclosed last week in a regulatory filing that it had rejected that earlier offer because it included unacceptably risky conditions. Instead, Monsanto said it chose to partner with P&U.
"To me, it looks almost reprehensible for Monsanto to have passed up the earlier offer and not put it before shareholders," said Isaly.
Isaly said the non-U.S. bid was "far richer" than the current deal, under which each P&U share would be exchanged for 1.19 shares of the combined company, while each Monsanto share would be worth one share.
New Jersey-based P&U's core business is prescription drugs, while St. Louis-based Monsanto owns the G.D. Searle drug unit and a large agricultural division that specializes in bioengineered seeds and high-tech crop-protection products.
The companies announced merger plans in December to form the world's 11th-largest pharmaceuticals business with combined company sales of $17 billion. They plan to conclude the merger by the second quarter of 2000.
"Pharmacia & Upjohn and Monsanto expect their combined pharmaceuticals sales to rise at an annual compounded rate of 14-15 percent between 1999 and 2002, versus typical forecasts for other companies in the low to mid-teens during the same period," P&U spokesman Paul Fitzhenry told Reuters.
Fitzhenry said that by 2002, combined pharmaceutical sales of P&U and Monsanto would likely jump $5.5 billion, about a 50 percent increase from expected 1999 levels.
Pharmaceuticals sales growth is expected to come from newer products such as Celebrex, Monsanto's arthritis drug, which is locked in an all-out battle with Merck & Co's <MRK.N> Vioxx. Celebrex chalked up revenues of $1.5 billion in 1999, its first year on the market.
The companies reiterated that they expected full 1999 sales of the combined continuing operations to consist of about $11.3 billion from pharmaceutical and $5.2 billion from agricultural business.
Annual cost savings for the combined company would be $650 million in 2002, analysts were told.
"The question is what happens after 2002, when the cost savings are already realized. At that point, the combined company's pipeline of new drugs will need to kick in to keep earnings growth in the 20 percent range," Davis added.
Although Monsanto's agricultural products had revenue growth of 21 percent in the first nine months of 1999, Davis said the unit's actual earnings before interest and taxes (EBIT) ware expected to dip for the full year and be inconsistent in coming years.
Looking ahead, the companies forecast that the agricultural unit would show gains in EBIT of about 28 percent to $910 million in 2000, 4 percent to $950 million in 2001 and 15 percent to $1.1 billion in 2002.
P&U shares may also have been helped Tuesday by news that it plans this month to seek U.S. and European approval for a once-daily form of its incontinence drug Detrol, which must now be taken several times a day. The medicine is expected to have global sales of about $325 million in 1999.
21:40 02-01-00
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P&U, Monsanto extend gains on merger enthusiasm
NEW YORK, Feb 2 (Reuters) - Shares of Pharmacia & Upjohn <PHU.ST> <PNU.N> and Monsanto Co. <MTC.N> jumped on Wednesday, adding to gains seen a day earlier on enthusiasm about the planned merger of the drug makers.
U.S.-Swedish P&U closed up 4-1/4 to 53-1/16, or almost 9 percent, while St. Louis-based pharmaceuticals and agricultural products firm Monsanto rose 2-13/16 to 41-1/4, or 7.3 percent, both on the New York Stock Exchange.
On Tuesday, New Jersey-based P&U gained 1-13/16 and Monsanto rose 3-1/8 after executives from the two companies began a three-week U.S. and European tour to drum up support for the all-stock deal among investors and analysts.
The suitors, which plan to complete their merger in the second quarter, said on Tuesday the combined entity would likely have earnings per share growth of more than 20 percent after 2000.
That would put them in the top tier of the industry, alongside fast growers such as Pfizer Inc. <PFE.N> and Warner-Lambert Co., <WLA.N> two U.S. rivals that are negotiating their own possible merger. |
