Waves in Biotech
Industry Mergers and
Acquisitions
Gordon Rausser, Robert Gordon Sproul Distinguished Professor
University of California, Berkeley
ICABR Conference
May 31, 2017
First Wave: Largely 1990’s
Second Wave: Currently Ongoing
Third Wave: 2020 and Beyond
First Wave: Largely 1990’s
Monsanto
1990’s
• One of most successful pivots in history of corporate America. Why?
1993
• Merges with Gargiulo
1995-1997
• Flurry of acquisitions
• Spinoff of Solutia (chemical operations)
First Wave: Largely 1990’s
Monsanto
1996
• Aquires Agracetus
• Purchases an interest in Calgene (Calgene acquired in 1997)
1997
• Original Monsanto purchases Asgrow agronomics
• Original Monsanto purchases Holden’s Foundation Seeds LLC and Corn States Hybrid
Service LLC
• Original Monsanto spins off industrial chemical and fibers business as Solutia Inc.
First Wave: Largely 1990’s
Monsanto
1998
• Original Monsanto purchases DeKalb Genetics Corp and Cargill’s foreign seed business.
2000
• New Monsanto Company, based on the previous agricultural division of Pharmacia,
incorporated as a stand-alone subsidiary of the pharmaceutical company.
• Two remaining businesses (agriculture and pharmaceuticals) separated as Monsanto
Company merges with Pharmacia & Upjohn Inc.
• Agricultural products business incorporated as Monsanto Company subsidiary, Monsanto Ag
Company. Pharmacia & Upjohn become subsidiary of Monsanto Company, which changes
name to Pharmacia Corporation.
First Wave: Largely 1990’s
Monsanto
2002
• New Monsanto Company spins out Pharmacia; now separate Monsanto
Company (was agricultural subsidiary)
• Purchases regional firms and the large fruit and vegetable company,
Seminis
• Purchases Delta and Pine Land (cotton)
First Wave: Largely 1990’s
Novartis / Syngenta
1996
• Novartis formed by the merger of:
• Geigy
• Sandoz Laboratories
• Ciba
2000
• Syngenta formed by the merger of:
• Novartis Agribusiness
• Zenec Agrochemicals
First Wave: Largely 1990’s
Monsanto
First Wave: Largely 1990s
Syngenta
First Wave: Largely 1990’s
DuPont Pioneer
1991
• Pioneer purchases 2 million shares in partnership with Mycogen Seeds; sold the shares in 1998.
1996
• Pioneer acquires 20% stake in Sunseeds Co. in exchange for vegetable seed operation.
1997
• DuPont acquires 20% stake in Pioneer; form Optimum Quality Grains LLC
1999
• DuPont purchases remaining 80% of Pioneer for $7.7 billion
First Wave: Largely 1990’s
Dow Chemical / Dow Elanco
Plant science component of Eli Lilly and Co., following life science strategy of Novartis,
Monsanto and others.
1989
• Joint venture formed between Dow and Eli Lilly
1997
• Dow buys out Lilly’s interest; becomes Dow AgroSciences
• Subsequently acquires Mycogen Seeds, Brazil Seeds and Rohm and Haas Ag Chemicals
business
• Dow Elanco slowly emerging in competitive seed and ag chemical space
First Wave: Largely 1990’s
First Wave: Largely 1990’s
First Wave: Largely 1990’s
Personal Lens on 1990s Consolidation Activities
in Plant and Animal Biotechnology
•
Rausser GC, Small AA, Yoo SJ. 1996. “Intellectual Property Rights and Market Structure in Agricultural Biotechnology.”
Department of Agricultural and Resource Economics Working Paper No. 799, UC Berkeley.
•
Rausser GC, Scotchmer S, Simon LK. 1999. “Intellectual Property and Market Structure in Agriculture.” Department of
Agricultural and Resource Economics Working Paper No. 880, UC Berkeley.
•
Marco AC, Rausser GC. 2002. “Mergers and Intellectual Property in Agricultural Biotechnology.” In Economic and Social
Issues in Agricultural Biotechnology, Evenson RE, Santaniello V and Zilberman D, eds., 119-35. Wallingford, UK and New York:
CABI Publishing.
•
Graff GD, Rausser GC, Small AA. 2003. “Agricultural Biotechnology’s Complementary Intellectual Assets.” Review of
Economics and Statistics, 85(2):349-63.
•
Marco A, Rausser G. 2008. “The Role of Paten Rights in Mergers: Consolidation in Plant Biotechnology.” American Journal of
Agricultural Economics, 90(1):133-51.
•
Marco AC, Rausser GC. 2011. “Complementarities and Spillovers in Mergers: An Empirical Investigation Using Patent Data.”
Economics of Innovation and New Technology, 20(3):207-31.
Second Wave: The Last Few Years
ChemChina – Syngenta: Value $43 billion
2017
• Both U.S. and Europe have approved merger
• 90% of shareholders have approved
• Currently only merger in Second Wave having achieved regulatory
approval
Proposed Mergers
Bayer – Monsanto: Value $66 billion
• shared vision of integrated agricultural offerings and delivering enhanced solutions for
growers
• creates leading innovation engine for next generation of farming
• $128 per share in all-cash transaction, 44% premium to Monsanto shareholders, aggregate
value of $66 billion.
• significant value creation, expected annual synergies ~$1.5 billion after Y3; additional
synergies from integrated solutions in future years
• committed to retaining strong presence in U.S.
• combined business’ global Seeds & Traits and North American commercial headquarters in
St. Louis.
Proposed Mergers
Bayer – Monsanto: Value $66 billion
• promised President-elect Trump $8 billion US investment if merger clears
regulatory approvals
• Bayer CEO promised to add 3,000 jobs at Monsanto, keeping
headquarters in St. Louis after the deal completed, Trump spokesman
Sean Spicer said in January.
Proposed Mergers
DuPont – Dow Chemical: Value $130 billion
• a “merger of equals,” Dow and DuPont investors equal shares of
combined company
• DowDuPont proposed to split after 18-24 months into:
• agriculture, including seeds and pesticides
• materials, including coatings, plastics and industrial chemicals
• specialty products, including chemicals key to the electronics, biosciences
and health industries
Third Wave: 2020 and Beyond
• Given the possibility of three large players in the ag biotech industry, there will
be significant incentives for numerous startups to engage in “entry for merger”
• Analogous to enterprise (SAS) and pharmaceutical industry
• Fundamental implication: Syngenta/Chinachem, Bayer/Monsanto, and
Pioneer/Dow Elanco will establish major strategic activities in acquisitions of
startups that have incremental value to their core businesses
• New agriculture and food industry technology entrants have begun in earnest
over last five years and will be dramatically advanced by concentration of
three big players