Business as usual for D&PL and Monsanto until sale final

Delta and Pine Land Co. and Monsanto Co. have locked horns on a number of occasions over the last eight years — D&PL asking for damages due to a failed 1998 merger and Monsanto seeking to pull its license for Bollgard and Roundup Ready technology from D&PL in 2004. Today, they're walking arm in arm.

On Aug. 15, the two companies announced that they had signed an agreement whereby Monsanto will acquire D&PL for $1.5 billion in cash. The transaction was unanimously approved by the boards of directors of both companies and is subject to D&PL shareholder approval, antitrust clearance and customary closing conditions.

Under terms of the agreement, D&PL shareowners will receive $42 per share in cash. Monsanto intends to finance the acquisition with a combination of cash on hand and a debt offering. No timeframe for the closing of the transaction has been announced.

“Both companies see today's announcement as a great opportunity to pair Monsanto's trait technology with the strong genetics and brand offerings of D&PL,” said Ernesto Fajardo, Monsanto's vice president of U.S. crop production, during an Aug. 15 teleconference.

Fajardo said the announcement does not change Monsanto's trait licensing strategy nor would it affect current trait licensees. The company recently introduced its second generation cotton technologies — Bollgard II and Roundup Ready Flex, which are licensed to a number of seed variety companies.

Monsanto also announced that it is preparing to divest its Stoneville cottonseed business “in order to pursue the acquisition of D&PL.” Fajardo said the divestment “is likely, so we are in the process of putting together a plan.”

This is the second attempt at merger for the two companies. In 1998, Monsanto and D&PL announced they had reached an agreement to merge D&PL into Monsanto, subject to the approval of D&PL's shareowners. In December 1999, Monsanto withdrew its filing for approval of the proposed merger with D&PL due to what it considered unreasonable terms from the U.S. Department of Justice. D&PL sued Monsanto in January 2000, seeking unspecified compensatory damages from the failed merger, including lost stock market value of approximately $1 billion.

Monsanto says the competitive landscape has changed significantly since the initial attempt at a merger with several major competitors entering the market and establishing large and growing business positions.

“Years ago, when we talked about this, competitors like Bayer weren't even in the marketplace,” Fajardo said. “Today, they have an important marketshare. Back then, Monsanto was the only provider of biotechnology. Today we have other providers.”

Randy Dismuke, D&PL's senior vice president, U.S. business and international operations, said that D&PL would continue with development of technologies which are the result of agreements with other companies, such as VipCot Bt cotton, a joint venture with Syngenta. “Today, (Monsanto and D&PL) are two separate companies, and during this time period, we will continue our efforts to develop those technologies.”

“We will continue to look at what is best for farmers,” Fajardo said of D&PL's ventures. “We're open to looking at all these technologies. When the time comes, we will be able to sit down and talk about the technologies with the providers to see if there is any interest in going forward.”

D&PL's soybean business is also part of the merger agreement, “but it's probably a little early to tell how it will be integrated with the rest of our soybean business,” Fajardo said.

Until the acquisition is approved by the Department of Justice, business will be as usual, representatives of the two companies said.

“D&PL will compete aggressively with Monsanto's Stoneville and NexGen cotton brands, as well as any other brands in the marketplace,” Dismuke said.

Dismuke added that harvest of cottonseed for the 2007 season has already begun, and the company expects good supplies of Deltapine varieties DP 555 BG/RR and DP 444 BG/RR, likely to be the top two varieties planted in the United States in 2007. “Barring any disasters from Mother Nature, we plan to have adequate supplies of both those products in 2007 and likely beyond that.”

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