© 1998 Nature Publishing Group http://www.nature.com/naturebiotechnology • ANALYSIS DeKalb family makes Monsanto pay market valuation

The heirs to DeKalb Genetics (DeKalb, IL) MI), Cargill (Minneapolis, MN), and DuPont stresses that the highest bid is not the only cri• decided to sell their controlling interest in the (Wilmington, DE). teria for sale of the company, citing the forma• family business in early February. Although the Monsanto, which dearly holds the lead tion of an in-house committee to assess such company is facing eight litigation cases involv• position, is "considering whether it may buy issues as the treatment of existing employees ing genetically altered crops, the family cited the stock it does not own;' according to com• and renovation of the company headquarters. "estate planning needs" when announcing pany officials. As well as already owning 40% of DeKalb officials insist that the timing ofthe their decision. The board responded by placing DeKalb stock, Monsanto dearly has a commit• Roberts family's decision was not influenced DeKalb's assets and available stock up for sale ment to agriculture biotechnology: In addition by the $70 million patent infringement lawsuit on the open market, thereby denying 40% to its research and licensing agreements with brought against Monsanto and DeKalb by stockholder Monsanto (St. Louis, MO) first DeKalb, Monsanto has moved aggressively into Mycogen (San Diego) (Nature Biotechnology right of refusal and pushing the stock price up agriculture biotechnology over the last 2 years 16:230, 1998). The jury determined that significantly. with the purchase of a controlling interest in Mycogen's patents describing the formation of DeKalb Genetics, a 90-year-old seed and Calgene (Davis, CA; producer of the Flavr Savr Bt resistant plants were invalid-protecting livestock company, was founded by Tom transgenic tomato), the purchase of gene-gun both Monsanto and DeKalb from paying Roberts. Although it has been a public compa• technology from Agracetus (Middleton, WI), potential damages to Mycogen. "I think it is a ny since 1970, the Roberts family has remained and the acquisitions of Asgrow Seed (Sentis, coincidence that all these things are happening the majority voting shareholder with 56% of France) and Holden's Foundation Seed com• now. More people would have asked that ques• the Class A shares. In March 1996, DeKalb pany (Williamsburg, IA). tion ifwe had lost;' says Badger, "but we won." CEO Bruce Bickner negotiated a corporate Novartis AG currently holds 8% of the DeKalb is facing eight pending litigation cases partnership deal with Monsanto whereby com market. The addition of DeKalb's 12% involving genetically altered crops. DeKalb was paid $159 million for 10% of the would make Norvartis a major player in agri• Debra Robertson Class A voting shares and enough Class B non• culture seed and would provide access to voting shares for a 40% stake. Part of the agree• DeKalb's proprietary transgenic plants. As Nature Biotechnology went to press, ment gave the first right of refusal of the Bioscience Securities (Orinda, CA) analyst Monsanto president Hendrick Verfaillie said Roberts' controlling shares to Monsanto, but Christine McCracken suggests that AgrEvo• Monsanto would be a "very aggressive bidder for on the condition that the board did not put the a joint venture between Hoechst AG Dekalb," and that he expected the winning deal company up for sale on the open market. (Frankfurt) and Schering AG (Berlin)• to be completed in 8 to 10 weeks. In the first 4 days following the announce• should also be interested in DeKalb. Although ment of the sale, DeKalb's Class B stock soared AgrEvo has developed com plants resistant to almost 100% to $65 per share, resulting in a its own Liberty herbicide, it has no seed divi• price tag of at least $2.3 billion for the entire sion. In addition, purchase of Dekalb would company. The sale "allows DeKalb to see its remedy the current patent dispute between true value in the open marketplace and what its AgrEvo and Dekalb over Monsanto's worth is to various players," says Jim Badger, Roundup herbicide-resistant com. director of communications at DeKalb. As part of an already existing technology Seed companies are greatly needed by agreement, DeKalb and Monsanto produce biotechnology concerns in order to move novel and sell crops that are resistant to Monsanto's plants to the marketplace--as illustrated by Roundup herbicide. John Wilbur, an analyst at Dupont's $1. 7 billion investment in Pioneer Hi• Salomon Smith Barney, suggests that Bred (Des Moines, IA) last September (Nature Monsanto will not gain greatly, in terms of Biotechnology 15:824, 1997). DeKalb's existing access to revenues, by purchasing DeKalb, and distribution channels provide a buyer with the could actually benefit from the sale of DeKalb means to bring biotechnology to the farm. In to a larger company such as Novartis. addition, the purchase price of DeKalb includes "Monsanto currently receives 50% of the crop• its 12% share of the $1.5 billion US com-seed based revenue from the partnership and about Guanidine market (second to the 42% held by its much another 25% from its 40% stake in the compa• larger competitor, Pioneer Hi-Bred), a growing ny;' says Wilbur. "Buying the rest of the com• hydrochloride soybean division, the corporate headquarters, pany would simply mean that Monsanto is used in substantial quantities for isolating all six research locations (including the biotech• would pay to get access to a revenue stream a nd denaturing proteins. O ur special "for nology laboratories in Mystic, CT), six seed they are already getting 75% of' In addition, mo lecular biology" grade is highly suitable production plants in Iowa, and a swine-genetics the use of the genetically altered plants devel• for the extraction o f R A and the pre• division in several worldwide locations. oped by DeKalb and Monsanto by another pa ratio n of high molecula r DNA. In con• Based on current deals in agriculture buyer is dependent on access to the herbicide• trast to many other producers, we manu• biotechnology, the short list of potential buy• resistance technology owned by Monsanto. If facture guanidine hydrochlo ride o urselves. ers, created by DeKalb officials, includes Monsanto was bought out as part of the deal, This guarantees high and constant quality Monsanto, Novartis (Basel, Switzerland), the company would still receive revenue from a nd enables us to provide it a t a fa ir price AgrEvo (Berlin), Dow Chemical (Midland, the crop partnership. - whether in gram or ton qua ntities. Merrill Lynch is currently handling all bids with no specific timetable for the sale of the Debra Robertson is a freelance writer working company, but estimates that bids be enter• MerckKGaA will Darmstadt · Germany in San Diego, CA. tained over the next 3 to 6 months. DeKalb

NATURE BIOTECHNOLOGY VOLUME 16 APRIL 1998 READER INQUIRY NO. • 325