Drug giant American Home Products agreed yesterday to buy Monsanto for $33bn (#21bn) in stock, creating a company with products ranging from over-the-counter drugs to genetically-engineered seeds.
In what the companies called a ''merger of equals'', AHP agreed to buy Monsanto by exchanging 1.15 of its shares for each share of Monsanto.
The two said they were combining in a deal that would create a company with a market capitalisation of more than $96bn (#60bn), with 1998 sales totalling $23bn (#15bn) from products ranging from life
sciences to agriculture, pharmaceuticals and household goods.
Several traders speculated that a rival bid for Monsanto might emerge, noting recent rumours that DuPont and Pfizer might be interested in an acquisition.
After the deal, Monsanto's shareholders will own about 35% of the new company.
The deal comes several months after the failure of merger talks between American Home and SmithKline Beecham. SmithKline dropped American Home to pursue a deal with Glaxo Wellcome, but those talks also eventually failed.
The combined company will have a 22-member board of directors, with representation equally divided between American Home Products and Monsanto. Corporate headquarters will be in Madison, New Jersey, where AHP is based.
The new company's agricultural business will be headquartered in St Louis, Missouri, where
Monsanto is based. Its pharmaceutical business will be in
Radnor, Philadelphia, and the consumer healthcare and nutrition businesses will be in Chicago.
Within three years of the closing of the merger, the companies expect annual cost savings of $1250m (#780m) to $1500m (#940m), they said.
The transaction is subject to approval by both companies' shareowners, normal governmental reviews and customary conditions.
The deal is intended to qualify as a tax-free reorganisation and to be accounted for as a pooling of interests.
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