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Biotech / Medical : Monsanto Co. -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (1082)	2/4/1999 6:11:00 PM
From: jopawa	Read Replies (1) \| Respond to of 2539

From thestreet.com Monsanto's Takeover of Delta & Pine Land Isn't Out of the Woods By Jesse Eisinger Senior Writer 2/4/99 3:00 PM ET Risk arbitragers are starting to worry about whether Monsanto's (MTC:NYSE) $1.6 billion takeover of Delta & Pine Land (DLP:NYSE) will actually happen. The companies originally said the deal, announced in May, would close by the end of 1998. But speculation that the deal won't go through has been rampant since Justice Department concerns came to light last June. The worries have become more persistent and acute this week and were most evident in the spread between Monsanto's per-share offer and Delta & Pine Land's stock price. The spread has widened significantly recently, a sign of nervousness about whether a deal will close. It has climbed to about $7.56, up from $2 to $3 a couple of weeks ago. Monsanto is offering 0.8625 of its shares for each Delta & Pine Land share, or about $41.94 a share. Monsanto was trading at 48 5/8, off 3/4, today, while Delta & Pine Land was trading at 34 3/8, off 3/8. "The Street obviously thinks there's something wrong with the merger," says Murray Robinson, Delta & Pine Land's vice chairman. Is there? "To my knowledge, no. The truth of the matter is there is no news. There is no meeting set up with the DOJ." The DOJ's concerns apparently revolve around the dominant cottonseed patent position Monsanto would have after the acquisition closes -- not market share. Monsanto would have -- depending on divestitures -- about an 80% share of the cottonseed market after the merger. The DOJ didn't return a phone call. Robinson wouldn't comment specifically on the DOJ's concerns. However, he says Monsanto responded with a summary briefing to the DOJ in January. "We are on the dark side of the moon. The DOJ is sitting with Microsoft (MSFT:Nasdaq). Joel Klein [the DOJ antitrust chief] is tied up with that. There's nothing to do except call them a lot and that tends to [upset] them," says Robinson. "There has not been any information because there is nothing going on. It's not a front-burner deal for the DOJ." At a Goldman Sachs agriculture investment conference Wednesday, Hugh Grant, Monsanto's agricultural division co-president, conceded that the DOJ and the two companies have "disagreements," according to three arbitragers. A Monsanto spokeswoman says, "We are continuing the process with the DOJ. We are confident we will come to a successful resolution." But she declined to comment on the timing of the deal's closure. At the same conference, Dow Chemical (DOW:NYSE) and Swiss drug and agricultural company Novartis both reiterated interest in making cottonseed purchases, according to one arb who attended. "Both reiterated they'd be interested in buying Delta & Pine Land or Stoneville Pedigreed Seed," a Monsanto division the company already has said it will sell, says the arb. "Of course, both tried to talk the price down." Dow officials didn't return calls seeking comment. A Novartis spokesman says the company always seeks opportunities but has a policy of not commenting on specific areas or acquisitions. Though extremely concerned, about half a dozen of the arbs who were interviewed thought the deal would go through. They cautioned that much of the fear came because of the complexity of the DOJ's issues and was fueled by speculation rather than actual knowledge. They pointed out that Monsanto has made many acquisitions of seed businesses and has experience dealing with the DOJ. Also, several arbs pointed out that the spread in the Monsanto/DeKalb Genetics deal, a previous MTC acquisition, widened dramatically right before the deal closed. The arb who attended the Goldman conference says, "When it comes to antitrust, when arbs don't know, they're idiots." But with other potential bidders, "I don't think there's any downside from here," he says. "Of course, there will be downside the day the deal breaks." Another arb says he established a small position Wednesday because he saw the uncertainty as irrational. "I was seeing arb fear to a ridiculous degree," he says. Risk arbs short the stock of an acquiring company and go long the stock of the target company, hoping to lock in the spread between the two stocks.