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7-Misc: DuPont/Monsanto could dominate farming for decades



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DuPont/Monsanto could dominate farming for decades
March 8, 1999

LONDON, Reuters [WS] via NewsEdge Corporation: A merger between Du Pont 
Co and Monsanto Co could create a company capable of dominating the 
world's fast-changing farming industry for decades to come. Combining the 
two businesses -- a project still firmly on the drawing board according 
to reports in the New York Times -- would immediately create the biggest 
seller of products for agriculture, with annual sales of more than $6 
billion. It would surge past Europe's Aventis, currently being formed 
from the merger of Germany's Hoechst AG with France's Rhone-Poulenc SA, 
on $4.5 billion, and leave Switzerland's Novartis AG and Britain's Zeneca 
Group Plc trailing. Despite its scale, analysts believe a merger would 
probably slide past antitrust authorities based on the group's existing 
portfolios, which are largely complementary. But they argue the real 
significance of the deal could lay a decade or more away, when the 
anticipated biotechnology revolution in world farming takes off.
At stake is the creation of an industry that could dwarf the current 
agrochemicals business, which has grown up since 1945 around chemical 
treatment of insects and diseases through pesticides and herbicides, plus 
provision of fertilizers and nutrients to encourage growth. But the 
unravelling of the genetic make up of plants, in tandem with that of 
humans, promises to revolutionise the way crops are raised, creating 
superbreeds of plants capable of fighting off diseases and insects. On 
Tuesday, Britain' biggest player in the field, Zeneca, estimated the 
global agrobiotech industry could be worth around $75 billion by 2020 
compared with just $33 billion today. But this is modest compared with Du 
Pont's estimates of $500 billion a year by 2020, followed by Monsanto's 
forecast of $100 billion by 2015.
The prize for the two U.S. groups and their main European rivals, which 
also include the Germans BASF AG and Bayer AG, is using genetic 
understanding of plants to create in-built resistance to disease, insects 
and chemicals used to destroy unwanted vegetation. Eventually farmers 
will use genetically-altered crops to boost yield and improve plant 
quality -- the area with the largest sales potential. "It is a period of 
tremendous excitement. I have seen more change in this industry in the 
last two or three years than since its inception in the post-war years," 
Zeneca Agrochemicals research and development director Dr David Evans 
told a meeting of analysts on Tuesday. Monsanto has led the way in the 
coming revolution, creating a brand of soya which is resistant to its own 
herbicide Roundup, and working on corn which is genetically-engineered to 
resist insects and tolerate herbicides. Companies on both sides of the 
Atlantic have started to pour ever greater sums into biotech research. 
Monsanto spent $4 billion buying three seeds genomics companies in 1997, 
while Du Pont shelled out $1.7 billion buying a 20 percent stake in 
another major seed company, Pioneer Hi-Bred International. "You have to 
position now in order to get research and development in on the new 
genes, to get them into seeds and on to the market," HSBC agropharma 
analyst Brian Wilkinson said. "That is an eight to ten year process. To 
be ready for this market when it takes off in 2010/2015 you have got to 
make these investments now."
Novartis, which some believe has been in danger of slipping behind in the 
biotech race, last year announced it was spending $600 million to build 
an agricultural research center in San Diego, and Zeneca said this week 
its biotech spending would treble this year to $60 million from $20 
million in 1997. "Thanks to the formation of Aventis, the European 
position in agrobiotech is very sound. Novartis is still a player to be 
reckoned with," Wilkinson said, adding that Zeneca was also positioning 
itself "astutely" in the fledgling sector. However, putting together Du 
Pont's financial muscle with the technology base Monsanto has spent 
several years and billions of dollars creating will raise the stakes for 
European players who have led the industry to date. "There is an 
industrial logic to this," Paribas analyst Philip Morrish said. "Du Pont 
has a lot of money and it would take them further in the direction they 
want to go." But HSBC's Wilkinson added: "This would be a very 
significant challenge to life science companies in Europe."

[Copyright 1999, Reuters]


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