The planned merger of chemicals and pharmaceutical firm Monsanto and US-Swedish drugs group Pharmacia & Upjohn has investors frowning and hoping for a rival bidder.
The deal announced on Sunday would create the 11th largest drugs company with sales of $17 billion (€16.9 billion) and prescription drug sales of $10 billion.
"I think it's a decent deal, but I don't think it's what many investors who were involved with Monsanto were hoping for," said Mr James Hickman, an analyst with Credit Suisse First Boston. "They didn't get a big premium."
The combined company's products would include the arthritis drug Celebrex as well as treatments for glaucoma, colo rectal cancer and insomnia, and would have combined market capitalisation of more than $50 billion. Shares in both firms fell yesterday, with Monsanto off 15 per cent, or 6 1/2 at 35 1/4, while Pharmacia shares dropped 10 per cent, or 5-5/16, to 45-1/16. Several analysts said Wall Street's snub of the merger deal left Monsanto and Pharmacia vulnerable to rival takeover bids.
Lehman Brothers analyst Mr Tony Butler said rival suitors may not emerge immediately, "but certainly there will be a greater possibility if their stocks don't improve between now and the potential close of the merger."
Rival suitors could include European players such as Novartis, SmithKline Beecham and Bayer which need greater presence in the US, analysts said.
The announcement ended months of speculation that Monsanto, troubled by a depressed stock price and opposition to its controversial genetically modified crops, would split off its agribusiness unit or be acquired.
Barclays Stockbrokers analyst Ms Elizabeth Klein said the group's plans to float up to 19.9 per cent of the agribusiness unit would allow it to work out the value of the unit and decide its long-term fate.
Although Monsanto is the target of a lawsuit from farmers and environmentalists seeking to stop its genetic engineering of crops without more rigorous testing, it is still one of the most profitable agribusinesses in the world.
