CORRECTED-DuPont/Monsanto could dominate farming for decades
In LONDON story headlined Du Pont/Monsanto could dominate farming for decades, please read in paragraphs seven and eight....
On Tuesday, Britain' biggest player in the field, Zeneca, estimated the global agrobiotech industry could be worth around $75 billion by 2020 compared with just $33 billion today.
But this is modest compared with Du Pont's estimates of $500 billion a year by 2020, followed by Monsanto's forecast of $100 billion by 2015....instead of...
On Tuesday, Britain' biggest player in the field, Zeneca, estimated the global industry could be worth around $700 billion by 2020 compared with just $33 billion today.
While Zeneca posits a relatively modest share of $75 billion for itself, the company's own figures estimate the agricultural biotech market will be dominated by Du Pont with sales of $500 billion a year by 2020, followed by Monsanto on $100 billion.... (Correcting interpretation of forecasts).
A corrected story follows.
By Jonathan Birt
LONDON, March 3 (Reuters) - A merger between Du Pont Co <DD.N> and Monsanto Co <MTC.N> could create a company capable of dominating the world's fast-changing farming industry for decades to come.
Combining the two businesses -- a project still firmly on the drawing board according to reports in the New York Times -- would immediately create the biggest seller of products for agriculture, with annual sales of more than $6 billion.
It would surge past Europe's Aventis, currently being formed from the merger of Germany's Hoechst AG <HOEG.F> with France's Rhone-Poulenc SA <RHON.PA>, on $4.5 billion, and leave Switzerland's Novartis AG <NOVZn.S> and Britain's Zeneca Group Plc <ZEN.L> trailing.
Despite its scale, analysts believe a merger would probably slide past antitrust authorities based on the group's existing portfolios, which are largely complementary. But they argue the real significance of the deal could lay a decade or more away, when the anticipated biotechnology revolution in world farming takes off.
At stake is the creation of an industry that could dwarf the current agrochemicals business, which has grown up since 1945 around chemical treatment of insects and diseases through pesticides and herbicides, plus provision of fertilizers and nutrients to encourage growth.
But the unravelling of the genetic make up of plants, in tandem with that of humans, promises to revolutionise the way crops are raised, creating superbreeds of plants capable of fighting off diseases and insects.
On Tuesday, Britain' biggest player in the field, Zeneca, estimated the global agrobiotech industry could be worth around $75 billion by 2020 compared with just $33 billion today.
But this is modest compared with Du Pont's estimates of $500 billion a year by 2020, followed by Monsanto's forecast of $100 billion by 2015.
The prize for the two U.S. groups and their main European rivals, which also include the Germans BASF AG <BASF.F> and Bayer AG <BAYG.F>, is using genetic understanding of plants to create in-built resistance to disease, insects and chemicals used to destroy unwanted vegetation. Eventually farmers will use genetically-altered crops to boost yield and improve plant quality -- the area with the largest sales potential.
"It is a period of tremendous excitement. I have seen more change in this industry in the last two or three years than since its inception in the post-war years," Zeneca Agrochemicals research and development director Dr David Evans told a meeting of analysts on Tuesday.
Monsanto has led the way in the coming revolution, creating a brand of soya which is resistant to its own herbicide Roundup, and working on corn which is genetically-engineered to resist insects and tolerate herbicides.
Companies on both sides of the Atlantic have started to pour ever greater sums into biotech research. Monsanto spent $4 billion buying three seeds genomics companies in 1997, while Du Pont shelled out $1.7 billion buying a 20 percent stake in another major seed company, Pioneer Hi-Bred International. "You have to position now in order to get research and development in on the new genes, to get them into seeds and on to the market," HSBC agropharma analyst Brian Wilkinson said.
"That is an eight to ten year process. To be ready for this market when it takes off in 2010/2015 you have got to make these investments now."
Novartis, which some believe has been in danger of slipping behind in the biotech race, last year announced it was spending $600 million to build an agricultural research center in San Diego, and Zeneca said this week its biotech spending would treble this year to $60 million from $20 million in 1997.
"Thanks to the formation of Aventis, the European position in agrobiotech is very sound. Novartis is still a player to be reckoned with," Wilkinson said, adding that Zeneca was also positioning itself "astutely" in the fledgling sector.
However, putting together Du Pont's financial muscle with the technology base Monsanto has spent several years and billions of dollars creating will raise the stakes for European players who have led the industry to date.
"There is an industrial logic to this," Paribas analyst Philip Morrish said. "Du Pont has a lot of money and it would take them further in the direction they want to go.
But HSBC's Wilkinson added: "This would be a very significant challenge to life science companies in Europe."
06:20 03-05-99
Copyright 1999 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. All active hyperlinks have been inserted by AOL. |
