SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 19, 1999
MONSANTO COMPANY
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-2516 43-0420020
------------------------ ----------- -------------------
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314) 694-1000
<PAGE>
ITEM 5. OTHER EVENTS.
On December 19, 1999, Monsanto Company (the "Company") and Pharmacia &
Upjohn, Inc. ("PNU") announced that they entered into a definitive agreement to
combine the two companies in a merger of equals transaction. In the transaction,
Company shareholders will retain their shares and PNU shareholders will receive
1.19 shares of the combined company for each share of PNU common stock that they
currently own.
The transaction is subject to, among other things, approval by both
companies' shareholders, normal governmental reviews and other customary
conditions. The merger is intended to qualify as a tax-free reorganization and
to be accounted for on a pooling of interests basis.
On December 19, 1999, the Company and PNU issued a joint press release
announcing the signing of the Merger Agreement. A copy of the joint press
release is filed as Exhibit 99.1 hereto and is incorporated by reference herein.
A copy of the visual portion of the presentation provided with respect to
the joint Company and PNU meeting with analysts (the "Joint Analyst
Presentation") is filed as Exhibit 99.2 hereto and is incorporated by reference
herein.
Statements made in the Joint Analyst Presentation that state the
intentions, beliefs, expectations or predictions of the Company, PNU or their
respective managements for the future are forward-looking statements. It is
important to note that both the Company's and PNU's actual results could differ
materially from those projected in such forward-looking statements. Information
concerning factors that could cause actual results to differ materially from
those in forward-looking statements is contained from time to time in the
filings of each of the Company and PNU with the U.S. Securities and Exchange
Commission (the "SEC"). Copies of these filings may be obtained by contacting
the Company or PNU, as applicable, or the SEC.
INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/ PROSPECTUS
INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO (THE "JOINT PROXY
STATEMENT/PROSPECTUS") WHICH WILL BE PREPARED BY THE COMPANY AND PNU IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. INVESTORS
ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION TO INVESTORS. WHEN COMPLETED, THE JOINT PROXY
STATEMENT/PROSPECTUS WILL BE MAILED TO THE SHAREHOLDERS OF EACH COMPANY. COPIES
OF THE JOINT PROXY STATEMENT/PROSPECTUS MAY BE OBTAINED FOR FREE BY CONTACTING
THE COMPANY OR PNU AND AT THE SEC'S WEB SITE AT WWW.SEC.GOV.
In connection with the execution of the Merger Agreement, the Company and
PNU entered into Stock Option Agreements, each dated as of December 19, 1999
(the "Stock Option Agreements"), pursuant to which (i) the Company has granted
to PNU an option to purchase up to 94,774,810 shares, subject to certain
adjustments (the "Company Option Shares") of Company Common Stock at a price of
$41.75 per Company Option Share and (ii) PNU has granted to the
<PAGE>
Company an option to purchase up to 77,388,932 shares, subject to certain
adjustments (the "PNU Option Shares") of PNU Common Stock at a price of $50.25
per PNU Option Share. Each Stock Option Agreement is exercisable only upon the
occurrence of certain specified events.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits. The following exhibits are filed as part of this report:
99.1 Joint press release, dated December 19, 1999, issued by the
Company and PNU.
99.2 Joint Analyst Presentation.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Dated: December 20, 1999
MONSANTO COMPANY
By /s/ Barbara L. Blackford
---------------------------------------
Name: Barbara L. Blackford
Title: Chief Counsel and Assistant
Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
99.1 Joint press release, dated December 19, 1999, issued by the
Company and PNU.
99.2 Joint Analyst Presentation.
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
MONSANTO AND PHARMACIA & UPJOHN TO MERGE,
CREATING GLOBAL LEADER IN PHARMACEUTICALS
WITH TOP-TIER GROWTH PROSPECTS
o Builds world class pharmaceutical business; combined pharmaceutical sales
force to enhance market potential of key products led by Celebrex
o Creates top-tier strength in critical U.S. market
o Robust pipeline and more than $2 billion annual pharmaceutical R&D budget
to fuel future growth
o Strong leadership and clear management structure to accelerate growth
potential and synergies
o Leading global agricultural business to be operated as a separate entity,
with a partial IPO to strengthen capabilities and help realize full value.
ST. LOUIS and PEAPACK, NJ (Dec. 19, 1999) - Monsanto Company (NYSE: MTC) and
Pharmacia & Upjohn (NYSE: PNU) today announced that they have entered into a
definitive agreement to create a dynamic and powerful new competitor in the
global pharmaceutical industry. The new company will have one of the strongest
sales forces in the global pharmaceutical industry, an expensive product
portfolio, a robust pipeline of new drugs, including a number with blockbuster
potential, and an annual pharmaceutical R&D budget of more than $2 billion. The
new company also will have one of the world's leading fully integrated
agricultural businesses. The combined company will have estimated 1999 sales of
$17 billion with a market capitalization of more than $50 billion.
-more-
<PAGE>
2
The combined company, as yet to be named, will have a significantly strengthened
position in the critical U.S. pharmaceutical market and complementary current
and near-term products in key therapeutic areas. It will have a leading sales
force in the critical U.S. pharmaceutical market which will account for more
than 50 percent of the company's global pharmaceutical sales.
The agricultural business has a leading global position in seeds, herbicides and
biotechnology traits. In conjunction with the creation of the new company, it is
expected that up to 19.9 percent of the agricultural business will be offered in
an Initial Public Offering (IPO). The agricultural business will become a
separate legal entity, with a stand-alone board of directors and its own
publicly-traded stock upon completion of the intended IPO.
Leading the combined organization as President and Chief Executive Officer will
be Fred Hassan, the current CEO of Pharmacia & Upjohn. Hassan will also have
operational responsibility for the new company's core pharmaceutical business.
Monsanto Chairman and CEO Robert B. Shapiro, will become the non-executive
Chairman for a period of 18 months, after which he will be succeeded by Hassan.
The new company's corporate headquarters will be located in Peapack, NJ, along
with the pharmaceutical business. The new company's agriculture business will be
headquartered in St. Louis.
Under the terms of the merger-of-equals transaction, which has been unanimously
approved by both boards of directors, Pharmacia & Upjohn shareowners will
receive 1.19 shares of the combined enterprise for each share of Pharmacia &
Upjohn they now hold. Each Monsanto share outstanding prior to the combination
will represent one share in the combined company. The transaction will be
tax-free to the shareowners of both companies and is expected to be accounted
for as a pooling of interests. Monsanto shareowners would own approximately 51
percent of the combined company's shares.
-more-
<PAGE>
3
Driven by top-line synergies, the new company is expected to achieve a higher
earnings level than either company on its own. In addition, the new company
plans to achieve annualized synergies of more than $600 million consisting of
cost avoidance and elimination of duplication, some of which may be reinvested
to accelerate growth opportunities.
Commenting on the transaction, Mr. Shapiro said: "The new company is being
created from two rapidly growing organizations with strong global capabilities.
It is a merger driven from strength, and will have the appropriate scale and
resources to capture the full value of its growth potential. We'll also be
achieving significant synergies as we combine two technology-driven,
market-leading businesses. The new company has a strong management structure.
Fred Hassan is a proven CEO and I'm confident he will bring the same dynamism
and focus on shareholder value to the new company that he brought to Pharmacia &
Upjohn.
Said Mr. Hassan: "This is a combination designed to achieve both business growth
and enhanced shareholder value over the near and long term. We are creating a
high-gowth pharmaceutical company with a global leadership in sales and
marketing, a superior R&D platform, and top-tier growth prospects, including
several products with blockbuster potential. At the same time, we are
establishing a structure which gives our agricultural operations the scope and
autonomy to be a leading independent entity in the agricultural field with high
growth opportunity supported by a strong capital structure and the potential for
direct shareholder investment."
The new company's growing pharmaceutical business will be led by Celebrex, an
innovative new treatment for arthritis launched in 1999 with sales to date of
$1.4 billion; Xalatan, the world's top selling prescription medication for
glaucoma; Detrol, the leading treatment for over-active bladder; Camptosar, a
treatment for colorectal cancer; and Zyvox, a revolutionary new antibiotic
expected to be launched in 2000.
-more-
<PAGE>
4
The new company has strong positions in a number of therapeutic areas, including
arthritis and inflammation, antibiotics, oncology, cardiovascular, central
nervous system, ophthalmology, urology and women's health. The company also has
a strong consumer healthcare business led by key global brands, including the
Nicorette family of tobacco-dependency products and Rogaine/Regaine, a treatment
for hair loss.
The combined company's board of directors will consist of 20 members, with
representation equally divided between Monsanto and Pharmacia & Upjohn.
Planned key appointments include that of Monsanto's Richard U. De Schutter, as
Senior Executive Vice President, Pharmacia & Upjohn's Christopher Coughlin, as
Executive Vice President and Chief Financial Officer; Monsanto's Philip
Needleman, Ph.D. as Chief Scientific Officer; and Monsanto's Hendrik A.
Verfaillie as CEO of the agricultural business. Further appointments will be
announced during the course of the merger integration process.
The transaction is expected to close in the second quarter of 2000, subject to
approval by both companies' shareholders, normal governmental reviews and other
customary conditions.
This news release contains certain forward-looking statements, including, among
other things, statements regarding each company's results of operations and
expected cost savings and earnings per share effects. These forward-looking
statements are based on current expectations, but actual results may differ
materially from anticipated future events or results. Certain factors which
could cause each company's actual results to differ materially from expected and
historical results are described in Monsanto's and Pharmacia & Upjohn's periodic
reports filed with the Securities and Exchange Commission, including Monsanto's
and Pharmacia & Upjohn's 1998 annual reports and Forms 10-K and Exhibits 99
thereto, respectively.
-more-
<PAGE>
5
This announcement is not an offer to sell nor a solicitation to buy any
securities. The offering with respect to the proposed merger will be made only
by the proxy statement/prospectus that will be distributed to shareowners in
connection with their consideration of the transaction.
-end-
Pharmacia & UpJohn Media Contact:
Paul Fitzhenry (908) 901-8770
Pharmacia & Upjohn Analyst Contact:
Craig Tooman (908) 901-8851
Monsanto Company Media Contact:
Scarlett Lee Foster (314) 694-2883
Monsanto Company Analyst Contact:
Nick Filippello (314) 694-8148
EXHIBIT 99.2
Monsanto and Pharmacia & Upjohn
Creating a Leading
Pharmaceutical Company
with Top-Tier Growth
Prospects
<PAGE>
Transaction Highlights
Financial Structure: o Stock-for-stock merger of equals transaction
Exchange Ratio: o 1.19 Monsanto shares for each P&U share
Board Membership: o 50% Monsanto / 50% P&U
Headquarters: o Corporate and
Pharma headquarters, Peapack, NJ
o Agricultural headquarters, St. Louis, MO
Stock Exchange Listings: o New York, Stockholm
Accounting / Tax: o Pooling of interests, tax free to shareholders
Expected Closing: o Second Quarter 2000
Agriculture IPO: o Public offering of up to 20% as soon
as practicable
2
<PAGE>
Board and Management
Board of Directors 50 / 50
Chairman (Non-Executive) Robert Shapiro
CEO and President Fred Hassan
Senior EVP Richard De Schutter
EVP and CFO Christopher Coughlin
Chief Scientific Officer Philip Needleman, Ph.D.
CEO Agricultural Business Hendrik Verfaillie
3
<PAGE>
Financial Highlights
Combined Revenue Preliminary 1999 Est.
[Bar chart with dollars in billions on verticle axis, "Total", "Pharma" and "AG"
on horizontal axis. Total is $17 Bn, Pharma is $11.8Bn (22% growth, footnote 1)
and Ag is $5.2 Bn (23% growth, footnote 2)]
Combined Market
Capitalization -
$50Bn+
Employees -
60,000
1 Adjusted for divestments
2 Including acquisitions
4
<PAGE>
[Triange in center of page with text "Creating the Growth Engine".]
Combination Creates High Growth Pharmaceutical Company
Superior R&D Platform
o Robust Phase III pipeline
o Enhanced discovery
o World-class development capability
o $2 Billion+ R&D investment
Global Leadership in Sales and Marketing o Leading sales presence in U.S. and
other key markets o Ability to execute global launches o Demonstrated launch
capabilities with Celebrex,
Xalatan, Detrol
Top-Tier Growth
o High growth potential of current products
o Freshness Index: more than one-third of sales
generated from new products
o Strong near term pipeline
o Minimal patent exposure
o $600 Million in cost synergies drives earnings and value
creation
5
<PAGE>
Strong Growth Platform
1999 Est.
Revenue
Product Indication ($000) % Growth
- -------------------------------------------------------------------------
Celebrex Arthritis and Cancer $1,400 + + +
Prevention
- -------------------------------------------------------------------------
Xalatan Glaucoma $500 50%+
- -------------------------------------------------------------------------
Detrol Overactive Bladder $300 200%+
- -------------------------------------------------------------------------
Zyvox Anti-infective Filed
- -------------------------------------------------------------------------
Valdecoxib Arthritis / Pain III
- -------------------------------------------------------------------------
Parecoxib Hospital Analgesia III
- -------------------------------------------------------------------------
Eplerenone Hypertension / III
Congestive Heart Failure
- -------------------------------------------------------------------------
Oncology Broad product and $800+
franchise technology platform
- -------------------------------------------------------------------------
Source: Securities research estimates
6
<PAGE>
COX-2 Platform Provides Exciting Growth Prospects
o Celebrex: Most successful new product launch in history
o $1.4 billion 1999E sales
o $6 billion NSAID market expected to double in the next few years
o Unique strategic partnerships enhance growth
o COX-2 platform provides robust growth through additional blockbuster
opportunities
o valdecoxib and parecoxib pain and arthritis indications
o Cancer prevention
o OTC applications
7
<PAGE>
Strong Patent Position and Low Exposure to Patent Expiration
Patent Expiration
- ------------------------
Zyvox 2014
Celebrex 2013
Detrol 2012
Xalatan 2011
Camptosar 2007
Percentage Sales at Risk of Product
Patent Expiration (1999 - 2003)
Compared to Total 1998 Pharma Sales
[Bar chart with numbers (0-60) on horizontal axis and the following companies on
the horizontal axis:
Astra / Zeneca
Merck
Eli Lilly
Schering Plough
SB
Pfizer
Roche
Bristol Myers
Newco]
Source IMS:SMR
8
<PAGE>
Leading Sales and Marketing Force
Number of Sales Representatives (1998)
[Bars appear after name indicating relative size of Rx Sales Force
in descending order.]
U.S. Rx Sales Force
Pfizer
J & J
Merck
BMS
Glaxo Wellcome
NewCo 3,800
Aventis
AHP
Novartis
Key Western European Markets
Rx Sales Force (1)
Aventis
Roche
Glaxo
NewCo 2,500
Merck
Pfizer
SKB
Novartis
Notes: (1) U.K., Germany, France, Italy
Source: Strategic Reports, Analyst Estimates
9
<PAGE>
Pharmaceutical Combination Drives Top- Line Synergies
Benefiting from larger sales forces
o Celebrex
o Detrol
o Vestra
o Zyvox
o Hospital and Oncology products
Attractive in-licensing/ co-promotion partner
10
<PAGE>
Global Critical Mass With Strong U.S. Presence
1999E Pharmaceutical Geographic Presence
Searle P&U
- ------------------------------------ ------------------------------------
[Pie Chart here: North America 74%; [Pie Chart here: North America 42%;
Europe 18%; Latin America 4%; Europe 36%; Latin America 5%;
Japan 2%; and Other 2%] Japan 11%; and Other 6%]
Pro Forma
------------------------------------
[Pie Chart here: North America 56%;
Europe 78%; Latin America 4%;
Japan 8%; and Other 4%]
Source: Company estimates 1999 Estimated Revenue
11
<PAGE>
Leading Pharmaceutical Research Platform
o Research & Development investment of $2Bn+
o Core R&D areas:
o Arthritis / Inflammation
o Oncology
o Infectious Disease
o Cardiovascular
o Central Nervous System
o Metabolic Diseases
12
<PAGE>
Attractive Combined Near-Term Product Pipeline
____ Searle
____ P&U
Estimated Launch Dates
- --------------------------------------------------------------------------------
1999 - 2000E 2001E- 2002E
- ---------------------------------- -------------------------------------
Celebrex - Pain / Inflammation Parecoxib - Acute Pain
Zyvox - Infectious Disease Valdecoxib - Second Generation COX-2
Vestra - Depression Eplerenone - Congestive Heart Failure
Aromasin - Advanced Breast Cancer and Hypertension
Pegvisomant - Acromegaly Tifacogin - Sepsis
Leridistim - Oncology
TPO - Oncology
SnEt2 - Macular Degeneration
Almotriptan - Migraine
-----------------------------------------------
Total Potential Peak Sales $8Bn - $10Bn
-----------------------------------------------
13
<PAGE>
Combined Depth of Pharmaceutical Pipeline
--------------------------
22
- ------------ --------- ---------- ----------- -------------- -----------
Pre-Clinical Phase I Phase II Phade III Pre Total
IND Registration Compounds
- ------------ --------- ---------- ----------- -------------- -----------
15 6 13 15 7 56
--------------------------
Breakout by Disease Area
------------------------
o Oncology: 23
o Cardiovascular / Metabolic: 8
o CNS: 5
o Pain / Arthritis: 3
o Infectious Diseases: 2
o Asthma: 2
o Women's Health: 2
o Other: 11
14
<PAGE>
Robust Pharmaceutical Sales Growth Driven by New Products
Mid to high teens revenue growth
[Chart here: Years 1998 - 2002 on horixontal axis and
"Base (Note 1), Growth Products, COX-2 and Pipeline on vertical axis.]
1 Includes royalties & other
15
<PAGE>
Cost Synergies
[Pie Chart here: Administrative and Corporate - 31%,
Sales and marketing - 20%, Manufacturing and
Distribution (COGS) - 16% and Research and
Development - 33%.]
Highlights
- ----------------------------------
o $600M of annual cost
synergies to increase earnings
and drive value creation
o Majority implemented over
three years
o Expected cost of restructuring
is $500M - $800M
16
<PAGE>
Strong Pharmaceutical Growth Momentum
Chart here: 1995E with arrow labeled "Earnings" to 2004E.]
Key Pharma Highlights
- ---------------------------------------------------------
o Industry leading growth rate
o Gross Margin: 80% and growing
o More than $2Bn R&D spending achieves competitive scale o Strong industry
patent position o Synergies drive value creation o Continuous profit margin
improvement approximately
1% per year
17
<PAGE>
Post-Merger Integration
Rapid assimilation while preserving growth momentum
18
<PAGE>
Highlighting the Ag Business Through An IPO
o Managed as an autonomous business
o Focused strategy
o Separate Board of Directors
o Entrepreneurial leadership with aligned incentives
o Facilitates tracking of pharmaceutical and agricultural performance
o High growth opportunity with a strong capital structure
o IPO to be undertaken as soon as practical
19
<PAGE>
Highlighting an Autonomous Ag Subsidiary
o Strongly growing revenue and earnings while major competitors are declining
o Roundup is the industry leader with $2.5Bn in sales
o Sustained volume growth of 18 - 20% per annum over the past five years
o Strong profit growth in ex-US markets (post- patent expiration)
o Leading seed positions enable technology delivery
o Technological leader in biotechnology and genomics
20
<PAGE>
Integrated Agricultural Strategy Drives Strong Performance
[Chart here: triangle with "Seeds/Biotech", "Downstream Rennesen/Animal AG"
and "Ag Chem" in vertices, "R&D Engine" in center of triangle.]
o Deliver short-term and long-term value
o Rapid market share gains in key technologies
o Mid-teens compounded annual increase in operating earnings
o Unique integrated capabilities in place
21
<PAGE>
Strong Ag Performance With Growth Opportunity
[Chart here: 1999E with arrow labeled "Earnings" to 2004E.]
Key Ag Highlights
- -----------------------------------------
o 1999 expected sales over $5 billion
o EBITDA margins in the mid-20% range
generates strong sustainable cash flow
o R&D expenditures of $600 million
fuel pipeline upside
22
<PAGE>
NewCo Will Achieve Top-Tier Financial Goals
Key Financial Goals
------------------------------------------------------------------------------
o Sustainable double- digit revenue growth
o Net Income growth to exceed 20% per year
o Strong financial position driven by debt reduction programs
o IPO proceeds
o Divestment of Monsanto Nutrition and Consumer businesses
23
<PAGE>
NewCo Delivers . . .
o Powerful new product pipeline
o Sustainable revenue growth
o Significant margin expansion
o Strong earnings growth
24
<PAGE>
Monsanto and Pharmacia & Upjohn
Creating a Leading
Pharmaceutical Company
with Top-Tier Growth
Prospects
<PAGE>
Forward- Looking Information
Certain statements contained in this presentation, such as statements concerning
the combined company's anticipated financial or product performance, its
pipeline, plans for growth and other factors that could affect future operations
or financial position, and other non-historical facts, are "forward-looking
statements" (as such term is defined in the Private Securities Litigation Reform
Act of 1995). Such statements often include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates," or similar expressions. Since
these statements are based on factors that involve risks and uncertainties,
actual results may differ materially from those expressed or implied by such
forward-looking statements. Such factors include, among others: the ability to
attain estimated expense savings, the ability to continue to successfully market
existing products, which may be adversely impacted by the introduction of
competitive products; the combined company's ability to integrate the two
businesses and other prior mergers and acquisitions; the combined company's
ability to successfully develop and market new products, the ability to expand
the market for existing products; the ability to fund research and development
activities; the ability to get to market ahead of competition; the success of
the combined company's research and development activities and the speed with
which regulatory authorizations and product rollouts may be achieved; the
ability to successfully negotiate pricing of pharmaceutical products with
managed care groups, health care organizations and government agencies
worldwide; fluctuations in currency exchange rates; the effects of the combined
company's accounting policies and general changes in generally accepted
accounting practices; the combined company's exposure to product liability
lawsuits and contingencies related to actual or alleged environmental
contamination; the combined company's exposure to antitrust lawsuits; the
combined company's success in litigation involving its intellectual property;
social, legal and political developments, especially those relating to health
care reform and product liabilities; general economic and business conditions;
the combined company's ability to attract and retain management and other
employees; the combined company's ability to compensate for anticipated generic
competition for Roundup(R) herbicide after the expiration of its patent in the
U.S.; governmental and public acceptance of agbiotech products, the effect of
seasonal conditions and of current commodity prices on agricultural markets; and
other risk factors detailed in Monsanto's and Pharmacia & Upjohn's respective
Securities and Exchange Commission filings, including their respective Proxy
Statements and Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
26
