Monsanto Shares Rise Amid Rumors of Hostile Takeover by American Home Products

Strategic Insights -

Monsanto Co., a multinational agrochemical and agricultural biotechnology corporation, saw a 5.2 percent surge in its shares to $40.56 on Monday, following a report by Forbes magazine. The magazine stated that American Home Products Corp. is considering a hostile takeover of Monsanto, which would give American Home full control of the company. This move would likely lead to the departure of Robert B. Shapiro, Monsanto's chairman and chief executive.

Monsanto and American Home Products scrapped a $35 billion merger last month, with American Home shareholders set to receive a 65 percent stake in the combined company. However, the companies failed to reach an agreement due to a clash of cultures and differences over strategy. Since then, Monsanto has been positioning itself as a stand-alone company by issuing $4 billion in stock and debt, raising $1 billion through divestitures, and cutting costs by laying off up to 2,500 workers.

Key Takeaways:

  • American Home Products Corp. is considering a hostile takeover of Monsanto Co., which would give American Home full control of the company and likely lead to the departure of Robert B. Shapiro, Monsanto's chairman and chief executive.
  • Monsato Co. shares rose 5.2 percent to $40.56 on Monday following the report by Forbes magazine.
  • The companies scrapped a $35 billion merger last month due to a clash of cultures and differences over strategy.
  • Monsanto is positioning itself as a stand-alone company by issuing $4 billion in stock and debt, raising $1 billion through divestitures, and cutting costs by laying off up to 2,500 workers.
  • American Home Products Corp. has five business units: pharmaceuticals, consumer health care, agriculture, biotechnology, and animal health, and owns well-known brands such as Anacin and Advil.
  • Monsanto will continue its ambitious research in crop technology and medicine to bring several products to market.
  • American Home's financial and marketing muscle were expected to help Monsanto bring products to market, but the companies failed to reach an agreement.
  • Monsanto has several acquisitions in the works, most notably the purchase of all the shares of DeKalb Genetics Corp. it doesn't already own.

Statistics:

  • 5.2 percent: the rise in Monsanto's shares to $40.56 on Monday
  • $35 billion: the value of the scrapped merger between Monsanto and American Home Products Corp.
  • 65 percent: the stake in the combined company that American Home shareholders were set to receive
  • $4 billion: the amount of stock and debt Monsanto is issuing to position itself as a stand-alone company
  • $1 billion: the amount of money Monsanto is raising through divestitures
  • 2,500: the number of workers Monsanto is planning to lay off to cut costs
  • 27 percent: the decline in Monsanto's shares since the American Home Products deal was announced
  • $63.94: the peak price of Monsanto's shares on Aug. 25
  • $33.75: the 52-week low of Monsanto's shares on Oct. 15

Sources:

  • Forbes magazine (Nov. 30 issue)
  • "Streetwalker" column by Forbes magazine (Nov. 30 issue)
  • American Home Products Corp.
  • Monsanto Co.
  • DeKalb Genetics Corp.