From: Jim McLain, Ventura County Star, Calif.
Published January 25, 2005 12:00 AM

Monsanto to Buy Seminis

Jan. 25—Seminis Inc., the giant Oxnard fruit and vegetable seed producer, is being sold to Monsanto Co. for $1.4 billion, more than double what the sellers paid for it just 16 months ago, the companies announced Monday.





Seminis, with 400 employees in Ventura County and about 2,500 more worldwide, is the world's biggest producer of fruit and vegetable seeds, with fiscal 2004 sales of $526 million.





Monsanto, a St. Louis-based manufacturer of industrial and other chemicals, including the herbicide Roundup, is a major player in the rapidly growing agricultural biotechnology field. Its sales last year totaled $5.5 billion, and the company has 12,600 employees worldwide.





Under the deal, Monsanto will pay $1 billion in cash, assume $400 million in Seminis debt and make up to $125 million in "performance-based payments" to the sellers if Seminis achieves certain revenue-growth targets. The deal is expected to close in the spring.





Seminis was taken private for $650 million in September 2003 by an investment group headed by Fox Paine & Co. LLC, a closely held San Francisco equity capital firm. Fox Paine, co-founded by Dexter Paine III, owns 58 percent of Seminis.





At least one analyst said Monday that Monsanto might be paying too much. The assessment might have triggered the company's shares to fall $3.62 to $54.10 on Monday. Citing the planned acquisition, Monsanto reduced its 2005 earnings estimate.





Representatives for both companies, however, were upbeat, saying each will gain in the sale. Seminis, launched in Saticoy as Petoseed in 1950, produces some 3,500 varieties of fruit and vegetable seeds using 1.5 million breeding lines for customers in 150 countries. Its facility on Camino del Sol in Oxnard combines Seminis' corporate offices with its largest production center.





Line workers there, who clean, treat, test for quality and ship seeds, learned of the sale when they arrived for work Monday. They were told their jobs, pay and benefits will not be affected because the companies produce very different products. As a wholly owned Monsanto subsidiary, officials said, Seminis will operate fairly autonomously and keep its name.





Afterward, it was business as usual at the Oxnard headquarters. Workers spent the afternoon hand-labeling soup-can-style containers for tomato seeds, weighing product and preparing for the spring rush. Pouches, the latest way to ship perishable seeds, rolled off an automated line packed, labeled and ready to ship to Europe.





Workers' jitters seemed to be set aside by the assurance that Monsanto is not looking to consolidate operations but to expand its agricultural business.





"We expect this will be a strong growth opportunity, and therefore we are not planning any work force reductions as a direct result of this deal," said Seminis spokesman Gary Koppenjan. "These are very complementary businesses with little or no overlap. There are no cost reductions that we would be looking for."





Monsanto began moving away from chemical manufacturing and into agricultural biotech in the late 1990s, said spokeswoman Lori Fisher.





The company deals primarily with corn, soybeans, cotton and other major-acreage crops produced in the South and Midwest.





Fisher said the move will enable the companies to share their breeding and seed development expertise. And because of the growing interest in healthier diets, Seminis' leadership position in fruit and vegetable production should add quickly to Monsanto's bottom line.





"They're the experts in fruits and vegetables. That's part of the reason we were interested in them," Fisher said.





"We anticipate they will continue focused in doing what they do very well and at the rest of Monsanto we plan to focus our efforts on the larger-acre crops that we've been involved with here. As a wholly owned subsidiary, we view Seminis as largely independent with good coordination. We don't see ... reductions being in play here."





Monsanto is an agriculture biotech leader that genetically engineers seeds resistant to weeds, diseases, pesticides and some severe weather. Seminis has stuck to conventional plant breeding methods to develop new varieties, said Koppenjan.





Biotech will be left as an option for Seminis well down the road, according to Monsanto. No changes in Seminis' operations, product line or distribution networks are planned.





However, Monsanto has numerous capabilities that should enable Seminis to get its products to market much faster.





A Seminis official declined to release the company's local annual payroll.





Bill Buratto, president and chief executive of the Ventura County Economic Development Association, said the acquisition is important because it should strengthen the company.





"Obviously, Seminis is one of the major agricultural-related industry players here in Ventura County and has been for a very long time," he said.





"It would seem ” that this is a potentially good deal for them and will be a good deal for us in the sense that they will continue to be here and perhaps be a little bit more healthy as a company and have other resources available to them in order to expand and grow."





Still, not everyone liked the deal. Fulcrum Global Partners analyst Frank Mitsch attributed the slide in Monsanto's stock to the deal's size, as well as the perception that Monsanto might be overpaying.





"I think investors aren't pleased that Monsanto is spending roughly double on a valuation basis what Seminis sold" for 16 months ago, he said. "That's a little bit disheartening."





Star staff writer Gretchen Macchiarella, Associated Press and Bloomberg News contributed to this report.





To see more of the Ventura County Star, or to subscribe to the newspaper, go to http://www.venturacountystar.com.


© 2005, Ventura County Star, Calif. Distributed by Knight Ridder/Tribune Business News.


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