DuPont Paying $7.7
Billion for Pioneer
Hi-Bred, Top Supplier
of Farm Seed
Related Article
Dupont and Pioneer Discussing the
Possibility of a Combination (March
13)
Forum
Join a Discussion on Merger Mania
By DAVID BARBOZA
uPont Co., seeking to create an
agricultural powerhouse to match
its giant chemical business, said
Monday that it would pay more than
$7.7 billion in cash and stock to buy
the remaining 80 percent of Pioneer
Hi-Bred International, the world's
largest producer of seed corn.
The deal -- which the companies had
said on Friday was in the works -- is
part of DuPont's effort to push
aggressively into the life sciences
arena, where it would compete in the
race to create and develop genetically
engineered seeds and crops.
In acquiring Pioneer, a company that
sells corn, soybean and other seeds,
DuPont hopes to develop genetically
altered seeds and sell them directly to
farmers worldwide in tandem with
DuPont's herbicides and pesticides.
DuPont, which already owned 20
percent of Pioneer, said on Monday
that it would acquire the remainder by
paying the equivalent of $40 a share,
with 45 percent of that in cash and 55
percent in stock.
Shares of Pioneer, which is based in
Des Moines, rose $4.0625 on Monday,
or 11.8 percent, to $38.375. DuPont,
based in Wilmington, Del., fell $1.50,
to $56.25.
Over the last year, analysts say, some
of the world's largest drug and life
sciences companies have been
scrambling to position themselves in
the fast-growing field of genetically
engineered crops and drugs, and
companies like DuPont want to be
involved with seeds to guarantee
greater access to that business.
"The seed companies are the key to the
whole world of biotech," said Leonard
G. Teitelbaum, an analyst at Merrill
Lynch & Co. "How do you get your
seeds to the farmer? You don't put them
in an envelope and mail them. It's
through seed companies."
At a news conference on Monday,
Charles O. Holliday Jr., the chief
executive of DuPont, said that while
DuPont had not expected to make a
large acquisition that might weaken the
company's stock, rapid developments
in the life sciences made such a deal
urgent.
Calling it "one of the most important
mergers in U.S. history," Holliday said
the acquisition of Pioneer would
allow DuPont to participate in the
creation of higher-yielding crops and
more nutritious foods in a world where
the amount of available arable land
will soon be inadequate to handle a
growing population.
When asked why such a deal needed to
take place now, he replied: "Speed.
Speed. Speed." The company simply
could not sit around and wait for things
to happen, he said.
If the acquisition is approved by
regulators, DuPont will take control of
the last remaining giant seed company,
making DuPont a formidable
competitor to Monsanto Co., which has
acquired more than $8 billion worth of
large seed companies over the last two
years, adding the heft of being the
world's largest seed company to its
strengths in herbicides and genetic
research.
Monday's announcement appears to
preclude any deal between DuPont and
Monsanto, coming just weeks after
executives close to the companies said
the two were considering a giant
combination that would join their life
sciences and pharmaceutical divisions.
Wall Street analysts say a deal
between Monsanto and DuPont could
now run into antitrust problems
because of their dominant positions in
seeds.
Analysts praised Monday's deal,
saying that there were indications that
Pioneer had pushed itself into a
marriage with DuPont after reports
circulated about a DuPont-Monsanto
deal.
Still, several analysts said they were
puzzled by the deal and how swiftly it
had occurred. Beginning in late 1997,
DuPont spent about $1.7 billion for a
20 percent stake in Pioneer, and the
two companies agreed to collaborate
on research and development. But
under the terms of the agreement,
DuPont agreed not to increase its stake
for 16 years.
The two companies have scrapped that
agreement and over the weekend the
boards of both companies agreed to the
deal, which lets Pioneer retain its
name and its headquarters in Des
Moines, Iowa.
"Pioneer had to be looking over its
shoulder, and DuPont was looking to
get deeper into life sciences," said
George S. Dahlman, an analyst at Piper
Jaffrey. "They had a chance to work
with each other, so that made the deal
easier."
DuPont said that financing for some of
the cash portion of the offer would
come from the $4.4 billion raised in
the spinoff last year of the Conoco
energy unit.
Holliday acknowledged that DuPont,
which had revenue of more than $25
billion last year, had shown lackluster
earnings growth last year. But he said
DuPont was steering a new course
toward pharmaceuticals and
agriculture.
DuPont said last week that it would
create a separate tracking stock for its
life sciences business to allow the
operations to participate more actively
in industry consolidation. The company
also said that it planned to seek
alliances in the pharmaceuticals
business.
Pioneer, which was founded in 1926
by Henry Wallace, who was a vice
president under Franklin D. Roosevelt,
has about 5,000 employees; DuPont
has about 92,000 employees. The
Wallace family currently has a 14
percent stake in Pioneer.
To Unsubscribe: Email majordomo@ces.ncsu.edu with the command
"unsubscribe sanet-mg".
To Subscribe to Digest: Email majordomo@ces.ncsu.edu with the command
"subscribe sanet-mg-digest".
All messages to sanet-mg are archived at:
http://www.sare.org/htdocs/hypermail