Reuters | December 21, 1999
CHICAGO - Cotton seed breeder Delta and Pine Land Co. said Tuesday it was "disappointed" Monsanto Co. withdrew a government filing related to a planned acquisition of Delta, and said Monsanto must pay an $81 million breakup fee.
On Monday, Monsanto, the life sciences group, said it withdrew a regulatory filing, citing delays in the review and demands by the U.S. Justice Department. The move came a day after Monsanto agreed to merge with U.S.-Swedish drug group Pharmacia & Upjohn Inc.
"We are disappointed that Monsanto has chosen to end its efforts to secure antitrust approval for this transaction," Delta Pine said.
Scott, Miss.-based Delta Pine said that by pulling the antitrust regulatory filing for the proposed deal, which was valued at $1.9 billion when it was first announced in May 1998, Monsanto had effectively ended its efforts to complete the transaction.
Shares in Delta closed off 11/16 to a 52-week low of 15-1/2 on the New York Stock Exchange. The stock fell on Monday amid concerns that the Monsanto deal would not go through. Monsanto shares fell 3/4 to close at 36-1/16 on the NYSE.
Delta Pine also said Tuesday its business fundamentals were strong and it expects to produce earnings of at least 85 cents per share for the current fiscal year, ending Aug. 31, 2000. In a First Call/Thomson Financial survey of two analysts, Delta Pine was expected to earn $1 for the fiscal year.
The planned acquisition has been mired in a lengthy antitrust review process, which analysts said centered on concerns about the combined company's powerful position in the U.S. cotton market and control over cotton seed technology. Delta Pine is the nation's largest cotton seed company.
Although Monsanto said the withdrawal does not preclude further efforts with U.S. regulators, it added that it was not optimistic any efforts will succeed.
"Under the terms of the merger agreement, Monsanto is obligated to pay Delta Pine a termination fee of $81 million," Delta Pine said. "In addition, we are evaluating our legal rights and will take all appropriate actions to protect our shareholders. We are engaged in discussions with Monsanto regarding these matters."
Scarlett Foster, a Monsanto spokeswoman, said the companies were still discussing whether Monsanto was obligated to pay a breakup fee.
"That is still under negotiation and discussion," Foster said. "This is not something that Monsanto failed to do, or did not do, or did not complete. Any company that would spend a year and a half trying to negotiate with the Department of Justice is not acting in bad faith. It's inappropriate for anyone to intimate otherwise."
Delta Pine co-developed with the U.S. Agriculture Department the so-called "terminator" gene which sterilizes seeds. The technology prevents plants from producing fertile seeds, forcing farmers to buy more seed rather than using seed from the previous year's crop.
Analysts had said the gene was one reason Monsanto wanted to acquire Delta Pine. However, Monsanto said in October it would not develop the "terminator" gene. The technology has drawn criticism from the Rockefeller Foundation and others who say it penalizes poorer farmers.
The company's earnings estimates were based in part on the National Cotton Council's preliminary estimate of 15 million acres of cotton planted in 2000.
