From the St. Louis Post-Dispatch::
Du Pont seeks life sciences partnership
March 11, 1999
By Robert Steyer
Of The Post-Dispatch
Du Pont Co., a tough competitor and rumored partner of
Monsanto Co., took several steps Wednesday to bolster its
life sciences businesses in the eyes of analysts and
investors.
But analysts said Du Pont's comments left unclear what the
impact would be on Monsanto. They said, however, that a
full-fledged merger or acquisition appears unlikely.
Du Pont said it was seeking alliances with drug companies
to expand its relatively small pharmaceutical operation, but
officials said a big acquisition was not in the financial
playbook.
"Given the success of our discussions to date, we expect to
conclude one or more of these alliances by the end of this
year," said Charles O. Holliday Jr., chairman and chief
executive of the Wilmington, Del., company.
He wouldn't comment on possible partners. A
spokeswoman said an alliance could be a joint venture,
marketing agreement or research deal.
Holliday also said Du Pont would create a "tracking stock," a
new security that would help investors distinguish between
its life sciences -- drugs, farm chemicals, biotechnology and
nutrition -- and its chemicals.
The company said it expected to file a registration statement
with the Securities and Exchange Commission by the end of
the year. It must evaluate potential tax consequences, guard
against diluting the holdings of existing shareholders and
get shareholder approval.
A spokeswoman said the tracking stock wasn't a precursor
to a spinoff of the life sciences businesses, which, at $4.3
billion in sales last year, accounted for about 18 percent of
corporate revenue. "We want to keep our science foundation
intact," she said.
Du Pont's life science businesses include drugs, crop
protection chemicals and biotechnology research. They also
include seed company alliances and ownership of St.
Louis-based Protein Technologies International.
Although Du Pont is the largest U.S. chemical company, its
life science component is small compared to that of
Monsanto or many other multinational companies.
The announcement sent Du Pont's stock up $3.81, closing
at $57.375 a share. Monsanto's stock rose $1 Wednesday
to close at $47 a share.
"There's not a lot of synergy or strategic fit" between
Monsanto's and Du Pont's drugs, said William Fiala, who
follows both companies for the Edward Jones brokerage. "If
there was a deal, it would be just to create more size."
Fiala said Du Pont's drug specialties -- AIDS, central
nervous system, blood pressure -- could be a better fit with
several other companies. Monsanto's strongest suit in the
market and in the lab is arthritis. It also is focusing on
cancer therapy, high blood pressure and women's health
care.
The other angle for a Monsanto-DuPont deal is crop
biotechnology and farm chemicals. But Monsanto and Du
Pont, through its 20 percent stake in Pioneer Hi-Bred
International, dominate the U.S. market for corn and
soybean seeds. Fiala said any combination would trigger
an intense review by federal regulators.
Du Pont's announcement was part of a plan unveiled last
year to better highlight the value of the company. Last year,
Du Pont spun off 30 percent of its oil subsidiary, Conoco,
and will eventually sell all of it to the public.
"They have a lot of attractive properties in their life sciences
that haven't been reflected in their stock," Fiala said. "This is
their attempt to assign value to different businesses."
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