By Lisa Seachrist
WASHINGTON — The $33 billion stock-swap merger between American Home Products Corp. (AHP) and Monsanto Co. is off.
AHP and Monsanto said the deal, which would have created a life sciences leviathan with a market capitalization of $96 billion and 1998 revenues approaching $23 billion fell through as the boards of each company voted it down.
"The boards of AHP and Monsanto simply decided that this wasn't in the best interest of the shareholders," said Lowell Weiner, spokesman for Madison, N.J.-based AHP. "This was a joint decision."
Neither company will be required to pay fees for backing away from the deal, but both companies' stock plummeted on the news. AHP's shares (NYSE:AHP) closed at $45, down $5, and Monsanto's (NYSE:MTC) ended the day at $37, down $13.375.
The merger agreement, originally billed as a merger of equals and announced on June 1, called for Monsanto stockholders to be issued 1.15 shares in the merged company for each Monsanto share they held. Monsanto Chairman and CEO Robert Shapiro and AHP Chairman and CEO John Stafford were to serve as co-chairmen and co-CEO's of the merged company.
Some early reports of the deal's demise indicated that top executives couldn't come to agreement over the direction or staffing of the new company. Neither AHP nor Monsanto would confirm those allegations.
"All I can tell you is that this merger wasn't in the best interest of the shareholders," Weiner said. "But, if the question is, 'Did the concept of co-CEOs cause the break up of this deal?' then the answer is, 'No.'"
Jeff Bergau, spokesman for St. Louis-based Monsanto, said that "it wouldn't serve anybody to go into the details of the merger's breakup."
One of the bigger consequences for Monsanto will be losing access to AHP's marketing and sales infrastructure. Monsanto will continue to develop its pipeline and market its products using corporate alliances with other pharmaceutical companies where necessary, Bergau said.
"We plan to continue operating as a stand-alone company," he said. "We made a strategic decision to move toward the life sciences before this merger was contemplated, and we will continue in that direction."
AHP, SmithKline Beecham Talks Also Failed
This is the second merger deal to fall through for AHP this year. In January, the company disclosed merger talks with SmithKline Beecham plc, of London. SmithKline ended the talks in early February and began pursuing a merger with Glaxo Wellcome plc, also of London, but ultimately those plans were also aborted.
Weiner said that the two failed mergers have little in common. SmithKline removed itself from merger talks with AHP, he noted, while Monsanto and AHP ended their agreement mutually.
"There is no new deal to merge with another company right now," Weiner said. "We don't need a merger, and are not presently pursuing one. But we will continue to consider new opportunities as they arise." *