When Chairman Robert B. Shapiro spun off Monsanto Co.’s century-old chemical operations to shareholders last year, investors considered it a revolutionary move.
After all, chemicals were the flagship of the once-stodgy Monsanto, and Shapiro seemed to be betting the farm on the newer worlds of agricultural biotech and pharmaceuticals.
In the endgame that emerged Monday, Shapiro’s move was proven to be even bolder than it appeared.
By spinning off chemicals, Shapiro eliminated excess baggage that would have stood in the way of the merger with American Home Products Corp., analysts said.
The spinoff also pushed him into the arms of American Home, by excising a cash cow that would have helped him support the massive debt load he took on in his effort to remake the company since becoming chief executive in 1995.
Without chemicals, Shapiro’s need for a Daddy Warbucks such as American Home became acute.
Though Monsanto is based in St. Louis, it has strong Chicago ties–starting with Shapiro.
In an unusual arrangement, the 59-year-old Chicago resident runs Monsanto from a simple cubicle in the Merchandise Mart. Under terms of the merger, he’s slated to become co-CEO of the combined company with American Home’s Jack Stafford, 60.
Monsanto’s G.D Searle unit is based in north suburban Skokie, and its NutraSweet-Kelco Co., known for its artificial sweeteners, operates out of the Mart. Monsanto also has research labs in Mt. Prospect.
Some 2,778 of Monsanto’s 21,900 employees–about one of every eight–work in the Chicago area, more than half at Searle, a company spokesman said. The spokesman declined to speculate on possible layoffs as a result of the merger.
Once a laggard, Monsanto has become one of the most sought-after trophy brides in Corporate America partly because of its promising pipeline of drugs and genetically engineered seeds.
Until Monday, the future of the company rested on the likes of its G.D. Searle division’s arthritis drugs. The new line of painkillers, known as Cox-2 inhibitors, work without irritating the stomach.
Analysts measure their potential revenues in the billions of dollars. But the company needs a bigger sales force to market those drugs to their fullest potential.
The other source of excitement has been the company’s strategically sound but costly buildup of its agricultural biotechnology operations.
Already, Monsanto dominates an important segment of agribusiness with its Roundup Ready seeds, which produce crops resistant to Monsanto’s Roundup weed killer.
Last month, Monsanto solidified its position by agreeing to invest more than $4 billion in two major seed companies.
Monsanto agreed to pay $2.3 billion for the 60 percent of Dekalb Genetics Corp. that it didn’t already own, and separately agreed to a stock swap valued at about $1.8 billion for Delta & Pine Land Co.
