Mycogen Corp. on Thursday said it has signed a letter of intentto acquire a 51 percent interest in The Lubrizol Corp.'sAgrigenetics Co. division in exchange for Mycogen stock worthabout $69 million.
The transaction will be structured as a partnership valued atabout $135 million. Lubrizol will hold the other 49 percent ofthe partnership, and as a result of the stock transaction willincrease its stake in Mycogen to 24.7 percent.
Lubrizol of Wickcliff, Ohio, will contribute Agrigenetics' pest-resistant transgenic plant technologies to the partnership,which will become a plant science division of Mycogen.
The combination of Mycogen and Agrigenetics technology andpatents will give the partnership a strategic edge in the crop-protection industry, according to Ken Hopping, vice presidentand secretary of Lubrizol.
Lubrizol's patents for producing pest-resistant transgenicplants, combined with Mycogen's patents for Bacillusthuringiensis (Bt) toxins and its CellCap system for extendingthe life of biopesticides, will enable Mycogen to become "quitea force" in the $7-to-$9 billion worldwide market forbioinsecticides and biofungicides, Hopping told BioWorld.
"We have already invested a lot in this technology over the lastfew years, and it is our belief that Mycogen will become aleader in the crop-protectant field," Hopping said. "Othercompanies may have to seek license agreements with thepartnership if they hope to operate in this arena."
The partnership will market the plant-protectant technologiesthrough Agrigenetics sales channels. Agrigenetics is the sixth-largest seed company in the United States.
"Mycogen uses CellCap encapsulation of Bt, which they spray onplants," Hopping said. "We have the same type of Bt technology,but through the use of gene transfer capabilities, we are able tobreed that pest resistance into the plant itself through thedevelopment of seeds and hybrid seeds. So the seed companiesbecome the method of delivering the technology to farmers."
"Monsanto is more adept at genetic engineering of plants, butthey don't have a seed company to deliver the technology," saidHopping. "Pioneer Hybrid is the premier seed company, butthey are not so strong in the genetic engineering of plants."
Agrigenetics recently successfully defended its broad Europeanpatent covering plant gene transfer using its T-DNA mediatedtransformation technology.
The European patent position is the "key" to the partnership'sstrategy, said Mycogen spokeswoman Marie Burke. AlthoughMonsanto Corp. is "the leader in genetic engineering of plants,they would have to license these rights from us if the patentshold up," said Burke.
The successful European defense "makes us feel even morestrongly that it could be successfully defended in the UnitedStates," where a similar Agrigenetics patent is pending, Burketold BioWorld.
Under the proposed agreement, Mycogen of San Diego willtransfer to Lubrizol 2.29 million shares of newly issuedcommon stock and $39.4 million of a new series of convertibleredeemable preferred stock. Mycogen will have 16.73 millionshares of stock outstanding after the transaction. The shares(NASDAQ:MYCO) closed at $14, up 75 cents, on Thursday.
Lubrizol's holding would increase to about 33 percent,assuming conversion of the preferred, which Lubrizol canconvert into Mycogen common any time during the first fouryears at $17.97 per share, and at $18.72 thereafter. Lubrizolhas agreed not to acquire more common stock without theapproval of the Mycogen board.
Mycogen can redeem all or part of the preferred at any time,with mandatory redemption after eight years; $10 million maybe subject to mandatory redemptions after one year.
Dividends on the preferred are payable in cash or additionalshares of preferred stock at the rate of 6 percent in the firstfour years and 8.5 percent thereafter.
Agrigenetics lost $1.6 million in 1991 on revenues of $88.6million. Mycogen lost of $3.3 million on 1991 revenues of $23.6million.
-- Kris Herbst BioWorld Washington Bureau
(c) 1997 American Health Consultants. All rights reserved.