Monsanto in $1.4bn Deal with Seminis

JEREMY GRANT / Financial Times (UK) 24jan2005

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Mindfully.org note: Monsanto has control of the world's food supply in mind.

Chicago — Monsanto on Monday moved to capitalise on a growing trend towards healthier diets by buying California-based Seminis, the world’s largest developer of fruit and vegetable seeds for $1.4bn in cash, including $400m in debt.

The move is a sign that food and agricultural companies are moving beyond the low-carbohydrates diet craze and are looking for ways to profit from signs that consumers are becoming more aware of the need to eat more healthily.

It is also another sign that revenues in the global agriculture industry are shifting away from traditional crop chemicals to seeds and the biotechnology businesses.

Hugh Grant, Monsanto chief executive, said: “The addition of Seminis will be an excellent fit for our company as global production of vegetables and fruits, and the trend towards healthier diets has been growing steadily over the past few years.”

Seminis provides over 3,500 seed varieties for commercial growers and wholesalers and is the world’s largest developer of tomato seeds.

It was sold by San Francisco based private equity firm Fox Paine & Co.

In addition to the assumption of $400m in debt, Monsanto will make a “performance-based payment” of $125m by the end of fiscal 2007.

Monsanto, which is already a leading producer of genetically modified maize and soyabeans, said that developing genetically modified vegetables from the Seminis portfolio could be an option “longer term”.

But the company would concentrate initially on traditional plant engineering methods to improve fruit and vegetable quality. Mr Grant said: “There’s obviously a great opportunity [in biotech] but it’s a long way out there.”

Don Basse, president of Chicago-based agriculture consultancy AgResource, said it would be logical for Monsanto eventually to use biotech to enhance the nutritional value of fruit and vegetables instead of focusing on prolonging shelf life and devising pest-resistant fruit and vegetable strains.

“My hope would be that Monsanto is buying Seminis to use their genetic abilities to enhance the nutritional value of other crops. We [consumers] don’t worry about weeds in apple orchards, we worry about the nutritional value of food,” he said.

Monsanto said the acquisition would be accretive to earnings by 2006, boosting cashflow to $750m for fiscal 2005 from a previous estimate of $600m.

Seminis derives 40 per cent of its business from Europe, the Middle East and Africa and had revenues last year of $526m. “It’s rare to have a ready-made opportunity to accelerate earnings and cash in the near and long term,” Mr Grant said.

Monsanto re-affirmed full year earnings of $1.85-$2 a share. Its shares were 3.6 per cent lower at $55.60 by midday in New York.

source: http://news.ft.com/cms/s/3db48484-6e2f-11d9-a60a-00000e2511c8,ft_acl=,s01=1.html 24jan2005