AgriBioTech Steps Up Effort to Find Buyer: Company Spotlight
Bloomberg News
November 17, 1998, 5:01 p.m. ET
AgriBioTech Steps Up Effort to Find Buyer: Company Spotlight
Las Vegas, Nov. 17 (Bloomberg) -- AgriBioTech Inc., a Las
Vegas-based producer of turf and forage seed, is stepping up its
efforts to find a buyer as it struggles to offset declining
earnings and rising debt.
Last month the company hired Merrill Lynch & Co. to help it
find a buyer for at least 20 percent of its shares. Today it said
it hired Deutsche Bank Securities -- whose parent, Deutsche Bank
AG, is one of AgriBioTech's creditors -- to help.
AgriBioTech is looking for a biotechnology company such as
Monsanto Co. or DuPont Co. -- which have paid high prices for
corn, soybean and cotton-seed companies -- to pay $25 to $50 a
share for a stake in AgriBioTech -- or up to eight times its
fiscal 1998 sales of $250 million.
''ABT management believes that strategic investors will
recognize in ABT the factors that have been 'drivers' of value
for other major seed companies,'' the company said in a Nov. 10
letter to shareholders. AgriBioTech officials declined to be
interviewed.
Monsanto, Dow Chemical Co., AgrEvo GmbH and others have
agreed recently to pay as much as eight times sales to acquire
corn and soybean-seed companies such as DeKalb Genetics Corp.,
Delta & Pine Land Co. and Mycogen Corp.
Biotechnology companies that develop improved genetic
characteristics for crops, such as insect resistance or enhanced
nutritional content, need the distribution network of a seed
company to deliver these traits to farmers.
However, several biotechnology and seed companies said they
would not pay as much for a forage-seed company as they would for
one selling seeds for crops such as soybeans or corn. That's
because forage crops such as alfalfa are only planted once every
three to four years and offer less potential for genetic
improvement.
Not Attractive Crops
''Quite frankly these are not attractive crops for us,''
said Heinz Imhof, chief executive of Novartis Seeds AG, the seed
division of Basel-based Novartis AG, one of the world's biggest
agricultural biotechnology companies. ''It's difficult to make
money from them and they are horrible to produce.''
Pioneer Hi-Bred International Inc., Novartis and DeKalb,
Illinois-based DeKalb Genetics Corp. sell alfalfa seed as part of
a broader line of seeds for major crops such as corn and
soybeans. Both Novartis and DeKalb buy alfalfa seed from outside
sources -- mainly St. Joseph, Missouri-based Research Seeds Inc.
-- and sell it under their own labels.
For Monsanto and Mycogen Corp., which is owned by Dow
Chemical Co., alfalfa is perhaps more important, since both have
units that specialize in producing or enhancing feed for dairy
cows. Both are working with Research Seeds to develop insect-
resistant and herbicide-tolerant alfalfa, and Mycogen has agreed
to work on insect-resistant seed with AgriBioTech.
Even so, both Monsanto and Mycogen concede alfalfa isn't as
important for them as corn, soybeans, cotton or even canola.
Alfalfa-seed specialists say it stands to reason, since the size
of the U.S. alfalfa-seed market is about $300 million, compared
to $2.3 billion for corn seed.
Small Market
''The people who are involved in developing technology
haven't focused on alfalfa because of the relatively small size
of the market,'' said Jack Tredinnick, executive vice president
of AgriPro Seeds Inc., which recently agreed to sell its alfalfa
business to AgriBioTech. ''It's also much more difficult to
introduce genetic technology into this kind of plant.''
AgriBioTech says its strategy to improve the quality of
forage seed through conventional breeding will eventually make
the crop more amenable to genetic improvements and makes
AgriBioTech as attractive over the long term as its more high-
profile peers.
''I really feel that virtually all major crops, whether
corn, wheat, soybeans, sorghum, rice, vegetables, will all be
closely evaluated by the major players and somebody will be
focusing on one of those,'' said George Dahlman, an analyst at
Piper Jaffray Inc. who has a ''strong buy'' recommendation on
AgriBioTech's stock and expects a buyer to pay ''somewhere in
between'' $30 and $70 a share for a stake in the company.
AgriBioTech said today its fiscal first-quarter earnings
fell 57 percent to $333,227, or 1 cent a share, from $784,540, or
3 cents, in the year-earlier period. The company cited a late
turf-growing season, higher production costs and higher interest
and amortization costs on short-term debt.
AgriBioTech shares rose 5/16 to close at 13 9/16.
--Toni Clarke in the Chicago newsroom (312) 692-3725 /mfr |
