Analysis: Monsanto-DuPont deal unlikely?

04 March 1999 16:17  [Source: ICIS news]

HOUSTON (CNI)--Neither Monsanto nor DuPont is commenting on the revival of rumours about their possible merger, and analysts don't seem to be taking the stories too seriously at this point, one analyst told CNI Thursday.

But David Wheat of the Bowditch Group in Boston, Massachusetts also said he's not surprised to hear that Monsanto might be talking with a company like DuPont. He said Monsanto has probably also talked with Dow Chemical about alliances, too, noting that Monsanto would need to mate with an entity of sufficient size.

"Monsanto needs a cash cow," said Wheat, noting that the antitrust investigation of a deal linking Monsanto and DuPont or Dow would prove rigorous.

He said: "If they merged, the new company would also own 20% of Pioneer Hi-Bred International, and I guess that would resolve a lot of patent litigation."

Wheat said he would not be too surprised to see some sort of smaller deal such as a large joint venture rather than a merger. And he said he'd be less surprised with the rumours if Monsanto had succeeded in completing its proposed deal with American Home Products last year.

The latest set of rumours actually began with a story in The New York Times that triggered reaction reports in other large US newspapers. The Times story emphasised the offbeat corporate culture at Monsanto and questioned whether a merger would work for cultural reasons.

Other analysts quickly scoffed at the idea, calling the odds of a Monsanto-DuPont merger unlikely.

Stock of both companies closed lower Wednesday after news of the rumours spread and their shares were little changed in early trading Thursday. On Wednesday DuPont shares closed at $50.25/ share (Euro46.10/share), off $1.06 and below its 52-week high of $84.44/share. Monsanto's shares fell Wednesday by $2.63/share to $47 compared with its 52-week high of $63.94.

Wheat said: "I'm sure Monsanto has been contacting everybody at one level or another. It's gotten leveraged well beyond what the market wants to see."

By: Gary Taylor
+1 713 525 2653

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