no comment. let this sleepy site figure it out!
May 5, 1998
Angry shareholders of Mycogen Corp. are suing the San Diego-based
maker of specialized crop seeds over a proposal by a Dow Chemical
Co. subsidiary to buy up remaining Mycogen shares at a price that,
according to critics, undervalues the company's value.
Two class-action lawsuits have been filed in San Diego's Superior
Court over a proposal by Dow AgroSciences, which currently owns
about 69 percent of Mycogen, to buy the remaining shares at a price of
$20.50 a share. The plaintiffs, a Colorado-based investment firm,
accuse the Michigan-based conglomerate of using its majority position
in the company to force a buyout of remaining shares on the cheap at
the expense of minority shareholders.
The lawsuits come at a time when Mycogen is struggling to compete
against the large players of the agricultural/biotech market. Mycogen
manufactures genetically altered crop seeds designed to be resistant to
insecticides and other compounds. The company's main competitor is
St. Louis-based Monsanto, owner of the popular RoundUp brand
name among others, which reported sales last year of $7.5 billion.
The buyout widely is viewed as crucial for Dow, which wants to
compete in the seed market but so far has lagged behind its rivals.
Under a current agreement, the company is forbidden from trying to
acquire Mycogen's remaining shares until February 1999. Last week,
Dow announced that its was asking Mycogen's board of directors, five
of whom were appointed by Dow, to amend the deal to allow the firm
to buy the rest of Mycogen's shares at $20.50 a share, the closing price
the day before the request was made.
According to attorneys for the plaintiffs, Dow's offer was intended to
freeze the price of Mycogen's stock in an effort to buy it cheaper now
rather than later when the price goes up. Mycogen shares climbed by
13 percent the day the proposal was announced, and shares closed at
$22.25 a share Tuesday.
"They are basically trying to buy Mycogen at a price lower than they
would get if they waited as long as the contract required them to wait,"
said Samuel Rosen, attorney for the plaintiffs -- Colorado-based
Harbor Finance Partners. "If only a few other shareholders tender their
shares, there will be no remaining market for the stock. People left with
a small percentage are put in a very low-liquidity position."
The lawsuits are being handled by Rosen's New York-based firm,
Wechsler Harwood Halebian & Feffer, as well as San Diego-based
Milberg Weiss, a specialist in securities-related lawsuits.
Michael Sund, a spokesman for Mycogen, said Tuesday afternoon that
the company had not yet seen the lawsuit and could not comment on it.
He said that Mycogen appointed an independent board of directors
specifically to evaluate the Dow proposal, who will make their
recommendations to the company.
Analysts watching the market think that Mycogen is likely to approve
the proposal, but not necessarily at the price Dow wants.
"This is the beginning of a negotiation. They could make a decision that
would be ultimately favorable to shareholders," industry analyst Jim
McCamant said. "But you file a suit first so the lawyers can be first in
line to collect fees."
Competition in the specialized crop business is extremely tense. Last
year, Mycogen spent millions in litigation over patent rights and other
issues against Monsanto, as well as some other competitors. The
company won a major battle in March when a San Diego jury ordered
Monsanto to pay more than $174 million in damages stemming from a
licensing dispute. Mycogen lost another key battle earlier, though, when
a federal jury in Delaware found against the company in a patent fight.
gallagher@sddt.com
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