Monsanto buys up another...

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Monsanto to buy Seminis for $1 bn

 

REUTERS[ TUESDAY, JANUARY 25, 2005 09:25:12 AM]

 

KANSAS CITY: Agriculture products company Monsanto said it will buy

Seminis, the world's largest commercial fruit and vegetable seed

company, for at least $1 billion from a private equity firm to

capitalize on the trend toward healthier eating.

 

Monsanto, whose shares fell nearly 7 per cent, will also assume about

$400 million in debt and will make a payment of up to $125 million by

the end of fiscal 2007, based on financial targets.

 

Monsanto, a leading developer of genetic modifications for crops like

soybeans and corn, said biotechnology modifications to Seminis' fruit

and vegetable lines were an option, but the initial focus would be on

leveraging Seminis' conventional breeding programs with Monsanto's

advanced research and development to develop improved product

options.

 

" In the near- to mid-term this is going to be about breeding, "

Monsanto chairman Hugh Grant told analysts and reporters on a

conference call. " In the long term, there may be an opportunity in

biotechnology. "

 

Seminis has only one biotech seed on the market now, a virus-

resistant squash introduced four years ago.

 

Grant said the vegetable seed market is enjoying solid growth, thanks

in part to healthier eating habits, and that Monsanto wants to

capitalise on that.

 

Seminis supplies more than 3,500 seed varieties to commercial fruit

and vegetable growers, dealers, distributors and wholesalers around

the world.

 

The 10-year-old Oxnard, California-based company's top sellers

include tomatoes, cucumbers and beans, and its seeds are sold in more

than 150 countries around the world.

 

The company is considered the largest fruit and vegetable seed

company in the world, with annual sales of $526 million in fiscal

2004. On a net basis, it lost $16.3 million in fiscal 2004, improved

from a loss of $31.7 million in fiscal 2003, according to regulatory

filings.

 

 

The company currently is privately held, with majority ownership held

by funds managed by private equity firm Fox Paine & Company LLC, of

San Francisco. Fox Paine bought control of Seminis from Mexican

conglomerate Savia in a deal announced in December 2002, for about

$650 million in cash and debt.

 

Seminis will operate as a wholly owned subsidiary of Monsanto.

 

The deal comes as Monsanto is shifting its focus from the highly

competitive herbicide chemical business to the seed industry, where

it has seen strong growth recently.

 

Monsanto already controls an estimated 14 per cent of the US corn

seed market and through licensing arrangements provides germplasm and

technology traits that extend its influence into about one-third of

the US market.

 

The deal is expected to close in Monsanto's 2005 fiscal third

quarter, which ends in May, and boost earnings in fiscal 2006, the

company said.

 

Monsanto said the deal should not change its 2005 earnings forecast

of $1.85 to $2.00 a share on an operating basis, but it revised its

projected net earnings for the year to a range of 86 cents to $1.06 a

share, from a previous forecast of $1.56 to $1.71.

 

Chief financial officer Terry Crews said Monsanto was slightly

adjusting downward its projected return on capital for 2005 and 2006.

But the combination should boost Monsanto's compounded annual growth

in gross profit to 7 per cent from 4 per cent.

 

" Seminis allows us to leverage our leadership ... to almost

immediately create additional growth for Monsanto, " said Crews.

 

Analysts said Seminis was a good strategic fit, though they

questioned the high price, which is about double the valuation the

company brought two years ago.

 

Monsanto shares were down $4.01 at $53.71 in late afternoon trading

on the New York Stock Exchange.

 

http://economictimes.indiatimes.com/articleshow/msid-1000440,curpg-

2.cms

 

 

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