Monsanto Sale May be Reconsidered
(27 June - Cropchoice News) -- A report Monday in Corporate Financing Week suggests the future of the "new" Monsanto is in question. According to the story, the recently announced "initial public offering" sale of Monsanto stock may be delayed or the entire agriculture company may be sold instead.
Pharmacia, a Swedish pharmaceutical company, completed its buyout of Monsanto in March. Pharmacia took the drugs division of Monsanto (Searle) into its own operations; but left the agriculture operations as a stand-alone division. Pharmacia then filed government paperwork to sell a 20% stake in the "new" Monsanto (i.e. the agriculture part of the old company).
But Corporate Financing Week says big investors in Pharmacia now believe the plan to sell 20% of an agriculture-only Monsanto may go badly and should be reconsidered. The issues that are clouding the sale, which was to take place next month, are uncertainty about GMO crops (which makes Monsanto's value uncertain) and concerns about the company's profitability.
The solutions being considered include either reducing the number of shares offered in the "new" Monsanto to drive interest up, or to sell off the whole agricultural company. Selling the entire company would be following the lead of major players like Novartis (maker of NK Seeds), which is reducing its exposure to ag biotech by spinning off crop divisions into a separate company, called Syngenta.
According to Corporate Financing Week "rumors are swirling in the market that the Monsanto division [of Pharmacia] is not having a good quarter..." The investor's concern about Monsanto's sales comes from a slight downturn in the first three months of the year and low grain prices. Monsanto's also recently offer to refund some southern cotton farmers' tech fees on Bt and RR cotton due to losses caused the drought. This may not be helping please stockholders either.
Monsanto is estimated to be worth $5 - $10 billion - the wide price range is due to uncertainty over the future of GMOs. If Pharmacia proceeds with the selling the 20% stake, analysts estimate share price would be $6-$10.
SOURCE: Corporate Financing Week, Monsanto (updated 6/28)