Monsanto and American Home Products Corp. Shares Rise Following $35 Billion Merger Announcement

Strategic Insights -

Shares of Monsanto Co. and American Home Products Corp. surged on Wednesday, as investors became less apprehensive about the massive $35 billion merger announced on Monday. The merger, which marked a significant consolidation move in the pharmaceutical and agrochemical industries, saw Monsanto's stock close at $54.50 a share, while American Home's stock closed at $48.62 1/2 a share, both experiencing gains after losses the previous day. Experts attributed the shift in investor sentiment to the perceived removal of a takeover premium from the companies' stock prices.

Key Takeaways:

  • The $35 billion merger between Monsanto and American Home Products Corp. led to a rise in shares of both companies, suggesting that investors are reassessing their valuations in light of the deal.
  • The merger's announcement on Monday initially sparked concerns among investors, but by Wednesday, trading volumes and stock prices indicated a growing acceptance of the partnership.
  • William Fiala, an analyst at Edward Jones brokerage, observed that the "dust is settling" on the merger, allowing investors to reevaluate the value they place on the deal.
  • The acquisition of DeKalb Genetics Corp. by Monsanto has been indicated as the driving force behind the merger, with the U.S. Justice Department requesting additional information relating to the bid.
  • The tender offer for DeKalb, which was scheduled to expire on June 12, has been extended due to the Justice Department's review, with the new expiration date set for November 1999.

Statistics:

  • Monsanto's stock closed at $54.50 a share on Wednesday, a gain of $1.56 from Tuesday's close.
  • American Home's stock closed at $48.62 1/2 a share, up 62 1/2 cents from Tuesday's close.
  • The tender offer of $100 a share by Monsanto for DeKalb's remaining 40% stake was commenced on May 15.
  • The merger between Monsanto and American Home Products Corp. has a total value of $35 billion.
  • The U.S. Justice Department's review of Monsanto's bid for DeKalb is expected to delay the completion of the deal until November 1999.

Sources:

  • "Wall Street Journal" (exact reference not provided in the original text)
  • Interview with William Fiala, Edward Jones brokerage
  • Interview with David R. Wagley, vice president and treasurer of DeKalb Genetics Corp.
  • Press release from Monsanto and DeKalb Genetics Corp. (exact date not provided in the original text)
  • Original text cited in the article (exact source and date not provided in the original text)