WILMINGTON, Del. -- DuPont Co. has agreed to buy the 80 percent of Pioneer Hi-Bred International Inc. that it does not already own for $7.7 billion in cash and stock, or $40 a share, to boost its growing agriculture unit.
Des Moines, Iowa-based Pioneer Hi-Bred, the world's largest seed-corn company, has annual sales of $1.8 billion from genetically enhanced grains and feed additives.
DuPont said it would pay cash for 45 percent of the shares and stock for the rest. The offer is an 81 percent premium over Pioneer's closing price Wednesday, before news of discussions between the two companies lifted Pioneer's shares.
DuPont, the biggest U.S. chemical company, renewed its drive last week to expand its life science businesses, including agricultural products, by announcing plans to seek alliances and issue a new class of stock. Gaining control of Pioneer positions DuPont to catch up with Monsanto Co., whose Roundup herbicide technology has been gaining market share at DuPont's expense.
"This clearly forms a powerhouse on the agricultural side that can compete with Monsanto," said Frank J. Mitsch, an analyst with Deutsche Bank Securities in New York, who gave DuPont shares an "accumulate" rating.
The merger should be completed this summer, the Wilmington-based company said.
DuPont bought its 20 percent interest in Pioneer for $1.7 billion in 1997. The companies are in a biotechnology venture called Optimum Quality Grains.
DuPont shares fell $1.50 yesterday to close at $56.25. Monsanto lost 37.5 cents, to $56.25.
DuPont said it expects dilution in its cash earnings per share of about 1 percent in 2000, the first full year the companies will be merged. Fully diluted earnings per share will fall about 7 percent, the company said.
Pioneer shares, which had declined 40 percent during the past 12 months as the sagging farm economy drove down seed prices, soared 40 percent Friday on news that DuPont was discussing a possible business combination with the seed company.
With Pioneer's seed technology, DuPont will be able to compete head-on with Monsanto in offering a "bundle" of products at one price through a single supplier, said Leonard Teitelbaum, a Merrill Lynch & Co. analyst who tracks Pioneer.
Monsanto has all the pieces for a bundle. It makes herbicides and pesticides, and with last year's acquisition of DeKalb Genetics Corp., it has insect-resistant and herbicide-tolerant seeds.
With DuPont's acquisition of Pioneer, both companies "could bundle everything," Teitelbaum said. "This redraws the battlefield."
He said the combination of new technology and new marketing is likely to increase market share for both companies. DuPont-Pioneer and Monsanto now control 55 percent of the corn market; Pioneer has 42 percent and Monsanto 13 percent.
Teitelbaum said he expects the share the two companies control to grow 20 percent after they introduce their "bundles" later this year.
Pioneer will keep its name and will keep its base in Des Moines, the companies said.
Charles Holliday, DuPont's chairman and chief executive officer, said the merger would create an agricultural enterprise with $5 billion in annual sales, which will focus on growth. He expects about a third of the company's profit to come from life sciences by 2002, up from about 20 percent in 1998.
Holliday called the transaction "one of the most important mergers in U.S. history" because of its impact on food production.
The chemical company raised $4.4 billion in October, when it sold 30 percent of its Conoco Inc. energy unit in the largest-ever U.S. initial stock sale. Proceeds from that sale will help finance the Pioneer purchase, DuPont said.
Pub Date: 3/16/99