Monsanto expands into fruits and vegetables

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" News Update from The Campaign " <newsupdate

 

Monsanto expands into fruits and vegetables

Wed, 26 Jan 2005 02:53:04 -0800

 

 

 

 

News Update From The Campaign

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Dear News Update Subscribers,

 

In a move that opens the door to the aggressive marketing of biotech

fruits

and vegetables, Monsanto has agreed to purchase Seminis, the world's

largest

producer of fruit and vegetable seeds, for about $1 billion.

 

Monsanto seems to be downplaying the significance of this move in

relation

to genetically engineered fruits and vegetables. In a somewhat coy

statement, their chief executive officer, Hugh Grant, stated " In the

long

term, there may be opportunities in biotech. "

 

Many activists feel this is a gross understatement and that Monsanto

will

push hard to bring genetically engineered vegetables and fruits out

sooner

rather than later. Some insiders speculate that Monsanto wants to get a

significant variety of biotech crops into the marketplace quickly while

the

Food and Drug Administration (FDA) regulations are still incredibly

lax.

 

Until recently, a significant focus of Monsanto was to move forward on

the

introduction of genetically engineered wheat. However, U.S. and

international opposition to biotech wheat caused the company to shelve

those plans in the short term.

 

Some feel this new grandiose move by Monsanto into the fruit and

vegetable

market is a strategic move to gain broader acceptance of biotech crops.

They

feel Monsanto will then again try to move forward with genetically

engineered wheat.

 

Monsanto is considered by many to be one of the world's most

controversial

companies. The company has faced numerous legal charges over the years

that

continue even in recent days.

 

In 2001, Monsanto was found guilty of releasing tons of PCBs into the

city

of Anniston, Alabama and covering up its actions for decades. The jury

found

Monsanto liable on all six charges it considered: negligence,

wantonness,

suppression of the truth, nuisance, trespass and outrage. Under Alabama

law,

the charge of " outrage " requires conduct " so outrageous in character

and

extreme in degree as to go beyond all possible bounds of decency so as

to be

regarded as atrocious and utterly intolerable in civilized society. "

 

Most recently, on January 6, 2005, the U.S. Securities and Exchange

Commission (SEC) filed two settled enforcement proceedings charging

Monsanto

with making illicit payments in violation of the Foreign Corrupt

Practices

Act (FCPA). It appears that Monsanto had bribed more than 140 current

and

former Indonesian government officials and their families by an amount

totaling more than $700,000 between 1997 and 2002. The cash was paid to

allow the company to develop genetically engineered crops in Indonesia.

 

The SEC lawsuit charged Monsanto with violating the FCPA and imposed a

civil

penalty of $500,000. They also issued an administrative order finding

that

Monsanto violated the anti-bribery, books-and-records, and

internal-controls

provisions of the FCPA and ordered the company to cease and desist from

such

violations. Further, the U.S. Department of Justice filed criminal

information charging that Monsanto violated the anti-bribery and books

and

records provisions of the FCPA. Monsanto agreed to pay a $1 million

monetary

penalty to defer prosecution charges by the Department of Justice.

 

Considering the track record of Monsanto, you might think that the FDA

would

closely scrutinize any new genetically engineered crops the company

plans to

bring to market. But under current FDA regulations, Monsanto is not

even

required to notify the agency that they are bringing out a new

genetically

engineered crop (unless the nutrient value is significantly altered or

the

product contains a known allergen.) Apparently the FDA trusts Monsanto

to do

the right thing. Do you?

 

Posted below are three articles about Monsanto's $1 billion purchase of

Seminis. The first article from the Wall Street Journal is titled

" Monsanto

Co. to Pay $1 Billion For Produce-Seed Firm Seminis. " The second

article

from the Associated Press is titled " Monsanto to buy seed company

Seminis in

$1B deal. " And the third article from The New York Times is titled

" Monsanto

Buying Leader in Fruit and Vegetable Seeds. "

 

Craig Winters

President

The Campaign

PO Box 55699

Seattle, WA 98155

Tel: 425-771-4049

E-mail: label

Web Site: http://www.thecampaign.org

 

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Monsanto Co. to Pay $1 Billion For Produce-Seed Firm Seminis

 

By SCOTT KILMAN

Staff Reporter of THE WALL STREET JOURNAL

January 25, 2005

 

Monsanto Co., looking for places to grow after converting many of

America's

corn, soybean and cotton farms to biotechnology, agreed to buy Seminis

Inc.

for $1 billion in order to expand its sights to vegetables and fruit.

 

The cost of the acquisition, which also calls for the assumption of an

additional $400 million in debt, startled some investors. That's

because, by

some measures, the closely held Oxnard, Calif., company was valued at

slightly more than $300 million in 2003, when a mountain of debt forced

Seminis to go private.

 

In New York Stock Exchange composite trading yesterday at 4 p.m.,

Monsanto

traded at $54.10, off $3.62, or 6.3%.

 

Monsanto executives yesterday defended the cost of the deal, its

biggest

since the late 1990s, arguing that while Seminis brings little in the

way of

biotechnology skills, it opens up new growth opportunities. Seminis,

which

has developed crops such as the baby carrot and the personal-size

watermelon

through conventional breeding, controls roughly one-third of the seed

used

to grow the fruits and vegetables found in most U.S. supermarkets.

 

Cobbled together in the 1990s by Alfonso Romo Garza, a Mexican

entrepreneur

and Olympic horseman who hoped to become as dominant marketing

vegetable

seeds as Monsanto was with seeds for larger-scale crops, Seminis

controls

23% of the world's tomato-seed market, 34% of the hot pepper-seed

market and

38% of the cucumber-seed market.

 

Executives at Monsanto, St. Louis, are playing down their interest in

genetically modifying these sorts of crops anytime soon. Although U.S.

consumers have largely accepted the presence in their groceries of

genetically modified ingredients made from soybeans and corn, opinion

research suggests that more shoppers would be leery if confronted with

something they eat whole.

 

Still, Monsanto executives made clear that they hope to genetically

modify

vegetables and fruit in the future, if the market conditions are right.

Seminis " makes a great platform, " said Brett Begemann, the Monsanto

executive vice president who will oversee the acquired company.

 

The planned acquisition, which allows Monsanto to leapfrog DuPont Co.

as the

world's biggest marketer of conventional and genetically modified seed,

is a

new direction for Hugh Grant, who returned the company to popularity on

Wall

Street since becoming Monsanto's chief executive officer in May 2003 by

cutting costs and narrowing its focus to a handful of crops. The wheat

business was jettisoned, for example. Monsanto's stock price has

roughly

doubled during Mr. Grant's tenure.

 

After years of cost cutting and retrenchment, Monsanto is eager to find

new

places to sell seed. Monsanto already saturates much of the American

grain

belt. Although the European Union is lifting its de-facto moratorium on

genetically modified crops, the business of selling biotech seeds there

will

be negligible for the foreseeable future.

 

Monsanto executives figure they can speed development of new vegetable

varieties by Seminis by giving it access to technology such as

molecular

markers, which help plant breeders track desirable traits. Seminis, the

world's biggest produce-seed firm, generated a net loss of $16.3

million on

sales of $525.8 million in the fiscal year ended Sept. 30.

 

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Monsanto to buy seed company Seminis in $1B deal

 

ST. LOUIS (AP) - Agricultural biotechnology giant Monsanto (MON) said

Monday

it will buy vegetable and fruit seed company Seminis for roughly $1B in

cash, broadening its portfolio of seeds and tapping into the trend of

healthier diets.

 

Monsanto said it will assume an additional $400 million in debt by

Seminis,

the supplier of more than 3,500 seed varieties to commercial fruit and

vegetable growers, dealers, distributors and wholesalers in more than

150

countries.

 

Monsanto - already staking more of its future on seeds that include

genetically modified ones able to withstand weeds, insects and disease

-

said it also would make a performance-based payment of up to $125

million by

the end of fiscal 2007.

 

" The addition of Seminis will be an excellent fit for our company as

global

production of vegetables and fruits, and the trend toward healthier

diets,

has been growing steadily over the past several years, " said Hugh

Grant,

Monsanto's chairman, president and chief executive.

 

Grant called 10-year-old Seminis, with sales of $526 million in its

2004

fiscal year, " uniquely positioned to capitalize on this fast-growing

segment

of agriculture and the acquisition likewise expands Monsanto's ability

to

grow. "

 

Citing the pending acquisition, Monsanto pared its estimate for fiscal

2005

earnings to 86 cents to $1.06 a share, down from a previous range of

$1.56

to $1.71.

 

Analysts surveyed by Thomson First Call were expecting Monsanto's

earnings

of $2.05 a share.

 

Pending regulatory approvals, Monsanto expects the deal to close

sometime

between March and May. The company said the deal should be accretive to

earnings per share, cash flow and revenue growth in fiscal year 2006,

its

first full year of operation.

 

The move comes two months after Monsanto's newly formed holding company

American Seeds acquired the seed company Channel Bio for $120 million

cash.

Monsanto formed American Seeds to support regional seed businesses with

capital, genetics and technology investments.

 

Seminis will be a wholly owned Monsanto subsidiary, headed by its

existing

president and CEO.

 

Monsanto said it expects to continue Seminis' focus on developing

products

using advanced breeding techniques, with biotech applications an option

well

down the road.

 

That push comes as biotech crops are flourishing in the United States

and

taking root overseas, accounting for several tens of billions of

dollars in

crops in five leading countries, despite European resistance to the

technology.

 

Alfonso Romo, chairman and chief executive of Seminis, said " we are

bringing

a complementary technology base and specialized expertise that can not

only

support economic growth for farmers, but contribute to the health and

nutrition of consumers on a global scale. "

 

***************************************************************

 

January 25, 2005

Monsanto Buying Leader in Fruit and Vegetable Seeds

The New York Times

By ANDREW POLLACK

 

In at least a temporary diversification away from genetically modified

crops, Monsanto, the agribusiness company, agreed yesterday to pay

about $1

billion to acquire Seminis, the world's largest producer of fruit and

vegetable seeds.

 

Until now, Monsanto has focused on corn, soybeans and cotton seeds, and

on

using genetic engineering to produce crops that are resistant to

herbicides

and insects.

 

But executives said yesterday that Monsanto would develop new vegetable

varieties using conventional breeding. They said the fruit and

vegetable

seed business could grow without biotechnology, based on a consumer

movement

toward healthier diets.

 

" It's fine to dream, but you have to decide what you're going to do

tomorrow

morning, " Monsanto's chief executive, Hugh Grant, said about biotech

fruits

and vegetables during a conference call with analysts. " In the long

term,

there may be opportunities in biotech. "

 

Some genetically engineered papaya and squash are on the market. The

first

biotech crop to be commercialized was the Flavr Savr tomato, developed

by a

biotechnology start-up that Monsanto acquired. But that tomato did not

catch

on.

 

Now industry executives say it is difficult to bring new biotech fruits

and

vegetables to market because of consumer resistance. Also, fruits and

vegetables are small crops, making it difficult to recoup development

and

regulatory costs. A few years ago, Monsanto decided to focus its

biotech

efforts on major crops.

 

The acquisition comes as Monsanto has been shifting its business from

agricultural chemicals to seeds and biotechnology. Over the last

decade, it

has aggressively acquired seed companies, mainly in the corn and soy

business, igniting some concerns that the markets were becoming too

concentrated.

 

The new acquisition not only makes Monsanto the largest supplier of

vegetable seeds in the world, but also, according to the company's

calculations, the largest seed and biotech company over all. It would

surpass DuPont, which owns the corn seed giant Pioneer Hi-Bred, in

terms of

revenues derived from seeds and biotech traits.

 

Seminis, based in Oxnard, Calif., had sales last year of $526 million,

with

its leading products being tomato, cucumber, beans and pepper seeds.

Its

main brands are Seminis, Asgrow, Petoseed and Royal Sluis and it sells

mainly to farmers, not gardeners. But, with partners, it has recently

started to develop some consumer items, like the Bambino miniature

watermelon and Lettuce Jammers, lettuce in the shape of a taco shell.

 

Its main rivals in fruit and vegetable seeds are Syngenta of

Switzerland and

Limagrain of France. Less than 1 percent of Seminis's sales come from

genetically modified seeds.

 

Under the deal, Monsanto will pay about $1 billion in cash and assume

$400

million in debt. It might also pay an additional sum of up to $125

million

by the end of fiscal year 2007 based on the performance of Seminis.

 

Seminis was started in 1994 by a Mexican entrepreneur, Alfonso Romo

Garza,

who decided to create a giant vegetable seed company by acquiring

smaller

ones. The company went public in 1999 at $15 a share, though Savia, a

Mexican company affiliated with Mr. Romo, retained majority ownership.

 

But the company suffered severe losses and in 2003, majority control

was

acquired for $3.78 a share by Fox Paine & Company, a buyout firm.

 

Fox Paine, based in Foster City, Calif., paid $163 million for what is

now a

58 percent stake in Seminis. New management helped spur growth and

restore

profits before special charges. Based on the $1 billion Monsanto is

paying,

Fox Paine will get about $580 million, the president and co-founder,

Dexter

Paine, said.

 

Shares of Monsanto, which have nearly doubled in the last year, fell

$3.62,

or 6 percent, yesterday to $54.10, as investors seemed to be surprised

by

the size and price of the deal.

 

" I think the market was expecting strategic acquisitions of the bolt-on

variety, " like small corn-seed companies, said Kevin McCarthy, analyst

at

Banc of America Securities. " This deal is clearly in a different

league. "

 

Frank Mitsch, analyst at Fulcrum Global Partners, pointing to how much

the

price of Seminis has risen since Fox Paine bought it in 2003, said, " It

does

make one step back and wonder as to why this transaction didn't occur

18

months ago. "

 

Monsanto has said that sales of its genetically modified soy, corn and

cotton continue to grow, but that it has had trouble expanding genetic

engineering to other crops.

 

It dropped an effort to introduce genetically modified wheat last year

after

some American farmers said such an introduction might hurt exports. And

its

genetically modified grass for golf courses has run into opposition

from

environmental groups.

 

With fruits and vegetables, it said, it will analyze genes in the crops

to

speed conventional breeding of improved varieties but would refrain for

now

from putting new genes into the crops.

 

 

 

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