Monsanto, DeKalb Negotiating Settlement With Justice Department
Bloomberg News
November 20, 1998, 7:03 p.m. ET
Monsanto, DeKalb Negotiating Settlement With Justice Department
Washington, Nov. 20 (Bloomberg) -- Monsanto Co. and the U.S.
Justice Department are negotiating to resolve antitrust concerns
over seed technology related to the company's proposed $2.3
billion acquisition of DeKalb Genetics Corp., said two people
familiar with the situation.
Talks between antitrust enforcers and company attorneys
center on problems that could arise if Monsanto, one of the
world's leading agricultural biotechnology companies, controls
two of the most popular genetic technologies used in the seed
industry, as well as DeKalb's extensive seed business.
These concerns could be resolved if Monsanto and DeKalb
agree to license the technology to other seed companies, the
people said.
Though the two companies set Nov. 22 as a deadline for the
Justice Department to clear the transaction or seek a court order
stopping it, Monsanto spokeswoman Scarlett Foster said it
wouldn't necessarily be in the company's best interests to go
ahead without clearance.
Foster declined to discuss details of what she said are
''confidential negotiations'' with federal antitrust enforcers
who are reviewing the merger to ensure it doesn't impede
competition in the seed industry. She said the Nov. 22 date may
be ''fluid'' rather than a firm deadline.
Monsanto and DeKalb both have key patents used in
''transformation technologies'' that implant genes in seeds to
make them resistant to insects and herbicides.
Bacteria and Guns
Monsanto's agrobacterium technology uses bacteria to
penetrate the seed and carry the gene with it. DeKalb's
technology involves micro-projectile bombardment, which uses a
gun to shoot the gene into the seed.
Antitrust enforcers are concerned competition would be hurt
if one company -- Monsanto -- controlled the most widely used
gene transformation technologies, the people said. Officials are
also concerned that Monsanto would have little incentive to
license the technology to rival seed companies rather than
keeping it for improvement of its own seeds, the people said.
Monsanto's acquisition of the DeKalb, Illinois-based corn-
seed producer would give it close to 50 percent of the market.
St. Louis-based Monsanto already owns several seed companies,
including Holden's Foundation Seeds Inc., which sells special
corn seeds used to make to make hybrid versions, and Asgrow
Agronomics, which sells a range of row crop seeds.
Holden's breeding seeds are present in about 35 percent of
all corn planted in the U.S. DeKalb is the No. 2 seller of corn
seed in North America, with 12 percent of the market.
Overlapping Markets
In June, the Justice Department sought more information from
Monsanto and DeKalb about the agriculture seed market in which
both companies' businesses overlap.
Last Friday, the companies said they'd extend a deadline for
the Justice Department to complete its review of the transaction
to Nov. 22 from Nov. 17. They also extended the deadline for the
transaction's financing until Nov. 27.
In May, Monsanto offered $100 a share for the remaining 60
percent of DeKalb it didn't own. DeKalb's shares, though, are
trading well below that amount, closing today at 88 3/4, down
3/16.
The same transformation technology that antitrust enforcers
are concerned about is also the subject of court disputes among
companies within the industry.
DeKalb is suing Pioneer Hi-Bred International Inc., Novartis
AG and Mycogen Corp., claiming their insect-resistant Bt corn
infringes on DeKalb's gene-gun technology. DeKalb's patent
relates not to the gun itself but to a process for transforming
corn tissue using the gun. Mycogen and others claim the patent
doesn't cover the tissue in their corn.
Restricted Access
Monsanto has already restricted access and raised the price
of Holden's breeding seed, and has cut off Mycogen altogether
because the two are involved in litigation over insect-resistant
Bt technology, said Michael Sund, a spokesman for San Diego-based
Mycogen Corp., a seed and biotechnology company owned by Dow
Chemical Co.
Monsanto could restrict access to its germplasm to companies
who are prepared to accept and pay for Monsanto's genetic traits
such as insect resistance, he said.
''Those are the conditions Monsanto is trying to impose on
the industry,'' Sund said. ''You are going to have Monsanto as
the only place that the industry can turn to for traits in
germplasm.''
The Justice Department is still reviewing Monsanto's
purchase of cotton-seed producer Delta & Pine Land Co., which
would give it about 85 percent of the U.S. cotton-seed market.
--Anne Marie Squeo in Washington at 202-624-1862 and Toni Clarke |
