Monsanto takes the Zeneca option
15 Jan 2000
Monsanto has become the latest major chemical company to succumb to the restructuring fervour that has been sweeping the industry for the past ten years. The company is taking the ICI/Zeneca route and demerging, creating two independent firms, one concentrating on chemicals, the other on life sciences.
`Monsanto now houses two distinct businesses with critical differences in their markets, research needs, investment needs, and plans for growth,' explains company chairman and chief executive, Robert Shapiro.
The chemicals business, which generated $285m in operating profits in 1995, on turnover of $4.7bn, includes nylon and acrylic fibres; a polymer sheeting for laminated glass; and a range of phosphorus-based compounds used in speciality intermediates, such as ingredients for coatings and adhesives, polymer modifiers and fire retardants. Some 40 per cent of its sales are outside the US. Demerger will decrease the business's cost structure, allowing it to wring more profits out of its turnover, Shapiro explains.
The life sciences business, by contrast, is more than twice the size of the chemicals division posting $700m operating income on $5.3bn sales in 1995. Its portfolio includes agrochemicals such as Roundup herbicide, the world's best-selling weedkiller; Nurofen artificial sweetener; and pharmaceuticals such as Ambien, a mild sleeping pill, and Arthrotec, and anti-arthritic. The business has also made some well-publicised and controversial forays into plant biotechnology, such as the `Roundup Ready' herbicide-tolerant soybean.
Shapiro, who is to head the new life sciences company, believes that the demerger will allow both businesses to `reach their maximum potential.' But inevitably, jobs will be lost. Monsanto employees will be `selected into jobs' in the new companies by the end of March, but there will be no place for 1500-2500 of them, 5-9 per cent of the current workforce. Monsanto is setting aside $400m-600m to cover the restructuring costs.
The demerger is subject to approval by shareholders and regulatory authorities. If it is given the green light, Shapiro believes the two daughter companies could be trading by this time next year.
