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

To: Dan Spillane who wrote (1644)	3/17/1999 12:36:00 AM
From: Anthony Wong	Read Replies (2) \| Respond to of 2539

03/16 Crop Biotech Leaders DuPont,Monsanto Taking Different Roads DES MOINES, Iowa (Dow Jones)--DuPont Co. (DD) and Monsanto Co. (MTC) are now the undisputed kings of crop biotechnology, but they have very different strategies. While Monsanto is concentrating on so-called "input" traits, DuPont is placing its bets on "output" traits. DuPont's agreement on Monday to acquire the 80% it doesn't already own of seed giant Pioneer Hi-Bred International Inc. (PHB) for $7.7 billion signals that DuPont wants to focus on genetically engineering the nutritional characteristics of crops, Pioneer Chief Executive Charles S. Johnson told Dow Jones. Monsanto, meanwhile, has made a big splash across the U.S. Farm Belt by transplanting into plants foreign genes that make crops cheaper to grow. Monsanto's Roundup Ready soybeans, for example, are genetically altered to survive a dousing by its Roundup herbicide, making it far easier for farmers to chemically weed their fields. Wall Street analysts estimate that roughly half of the soybeans planted this year in the U.S. will contain the Roundup Ready trait, which could generate roughly $300 million this year in revenue for Monsanto and its partners. Monsanto is the nation's second-biggest seed company, behind Pioneer. DuPont and Pioneer already had a crop biotechnology joint venture aimed at output traits. Among other things, their scientists are manipulating the amino acid and fatty acid levels in plants. They've already changed some crops to make them a more potent source of livestock feed and to invent a healthier cooking oil. The venture, formed in January 1998 and named Optimum Quality Grains, is contracting with thousands of Midwest farmers to grow crops such as corn with an unusually high level of oil, a source of energy for livestock. To be sure, Monsanto executives at its St. Louis headquarters are also interested in changing the quality traits of crops. Monsanto, for example, owns a technology for slowing the ripening process in tomatoes. But industry officials say that DuPont, a Wilmington, Del., chemicals giant, has by far the biggest patent estate for output traits in crops. Pioneer hasn't put nearly as much effort as Monsanto has into developing input traits such as insect-resistance and herbicide-tolerance. Indeed, Pioneer got these traits into its seed by licensing them from Monsanto years ago. Johnson told Dow Jones that the licenses last in perpetuity and aren't affected by any change in control of Pioneer. In the Dow Jones interview, Johnson said farmers won't notice much change in how they buy seed in the wake of the DuPont deal. Pioneer will keep its management headquarters in Des Moines, Iowa, and operate as a separate DuPont unit. Pioneer will also keep its brand names. Some analysts expect DuPont to bundle sales of its crop pesticides with Pioneer seed. But Johnson said he isn't aware of any plans to do that anytime soon. The terms of DuPont's $7.7 billion cash and stock offer are somewhat unusual. DuPont didn't demand a breakup fee if Pioneer were to run off with a higher bidder. Johnson said DuPont doesn't have a right of first refusal. Realistically, however, any competing bidder would be at a disadvantage against DuPont. DuPont already owns 20% of Pioneer. And Pioneer has unequal system of voting rights, which is designed to slow a hostile suitor. Investors who hold their Pioneer common shares for more than three years get five votes for each share. Before then, it's one-share one-vote. - Scott Kilman; 312-750-4128 (END) DOW JONES NEWS 03-16-99 10:54 PM