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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Tommy D who wrote (20291)	5/9/1998 8:04:00 AM
From: Henry Niman	Respond to of 32384

Monday's Barron's cover story is on DuPont. The story talks about potential mergers and/or acquisitions and indicates the the "real growth" is in Biotechnology: The hot rumor right now is that DuPont would very much like to rapidly expand its biotechnology businesses, either by acquiring another firm or by launching a major joint venture. One of the names that most commonly comes up is Monsanto, the St. Louis-based company that in 1997 spun off its chemical business as a separate publicly traded company called Solutia. Buying Monsanto would not be cheap. The company has a current market value of $33 billion, and its top officials would probably demand a significant premium above that to get a deal done. But DuPont does have a hidden war chest. Conoco, the oil and gas operation DuPont bought in 1981, is worth somewhere between $25 and $30 billion and could easily be sold or spun off to raise cash. DuPont top brass are on record that Conoco is "not a strategic asset." DuPont could also afford to take on more debt, as its debt-to-capitalization ratio is 50%. Another possible acquisition target is Britain's Zeneca Group, which has a drug business as well as biotechnology operations. Zeneca's market value is nearly $40 billion, but its earnings growth is expected to diminish because many of its drugs are losing their patent protection in a few years' time. For obvious reasons, Holliday ducks questions about merger talks and possible acquisitions. "Companies talk all the time," he notes. "Yes, DuPont has been talking half a dozen times a day to Monsanto, Zeneca, Hoechst, Dow Chemical and just about everyone else in the industry." But are there top-level talks? "No comment," says Holliday."If you are talking long-term about Life Sciences," he adds, "what it would take to make money is to achieve more productive research. We can do that three ways, by spending more of our money, making a small acquisition or doing a giant deal. We continue to explore all three options." Whatever his acquisition plans, Holliday is certainly turning up the heat on internal performance as part of his effort to reduce the company's longstanding cyclicality in profits. The aim is to get earnings rising by an average of at least 10% a year over the next four to five years, with even the occasional down years not falling too far below that target. Though the new high-tech DuPont is light years changed from the cyclical chemical company it used to be, Holliday's upbeat story is not finding an especially sympathetic audience on Wall Street. Though previous CEOs cut costs and closed inefficient operations, while Holliday himself has unveiled a restructuring focused on higher growth businesses, critics are still busy carping that DuPont has fumbled the ball. Instead of just restructuring, they argue, the company should have split itself up, spinning off Conoco and the slow-growing chemical businesses to focus exclusively on biotechnology, where the real growth is.