UPDATE 2-Monsanto to acquire Brazil's Aly for $290 million
(Adds Sao Paulo to dateline, details, byline)
By Euan Rocha and Inae Riveras
NEW YORK/SAO PAULO, Nov 3 (Reuters) - Monsanto Co (MON.N) said on Monday it agreed to buy Brazil-based Aly Participacoes Ltda for $290 million, giving the agricultural biotechnology company a bigger presence in developing new types of sugarcane.
Monsanto will use its own cash to acquire Aly Participacoes from Votorantim Novos Negocios Ltda and its sister company, Votorantim Industrial S.A., the company said in a statement.
"Our goal with this approach is to increase yields in sugarcane, while reducing the amount of resources needed for this crop's cultivation, just as we're doing now for corn, soybeans and cotton," said Carl Casale, Monsanto's head of global strategy and operations.
St. Louis-based Monsanto, which makes crop protection chemicals and biotech seeds, already has a leading presence in the corn, cotton and soybean seed markets worldwide.
The company is also expanding in the vegetable seed market and earlier this year agreed to acquire Netherlands-based De Ruiter Seeds for $860 million. Monsanto already owns Seminis, which controls a large share of the North American vegetable seed market.
Aly Participacoes operates CanaVialis S.A., the world's largest private sugarcane breeding company and Alellyx S.A., which is focused on developing biotech traits mainly for sugarcane. Both based in Brazil.
Brazil is the world's largest producer of sugarcane and the largest producer and exporter of sugar. Nearly 60 percent of the Brazilian cane crop goes to ethanol production.
Casale said Monsanto's foray into cane was driven by a number of factors, including that cane is a widely grown crop with about 50 million acres planted each year.
"If we look at the technologies that we have developed for corn, we think that the biotechnology traits that we've invested in there can bring a lot of value to sugar as well," said Casale, in an interview with Reuters.
LONG-TERM PROSPECT
The deal provides Monsanto with a unique genetics base and resources to speed up the development of higher yielding cane.
"Global demand for sugar and biofuels is starting to increase at a faster pace than the production of cane, which is essential to satisfy these needs," said Andre Dias, the head of Monsanto in Brazil in a news conference in Sao Paulo.
"Considering the global economy's current situation (the deal) is a sign of our long-term compromise with agriculture and Brazil," Dias said.
The company does not expect the deal to add to its earnings until the middle of the next decade.
Monsanto also expects to book a purchase-accounting adjustment for in-process research and development.
The first product it will launch, in 2009, is a conventional cane variety with improved yields. Genetically modified varieties are not expected before 5 or 6 years.
Monsanto had already signed a trait-collaboration and licensing agreement in 2007 with CanaVialis and Alellyx to develop and sell certain cane technologies in Brazil.
Monsanto plans to retain the roughly 250 employees at both companies and focus on development of the businesses.
Its shares, which peaked at $145.80 in June, have been hurt amid the wider commodity sell-off of the last few months. On Monday, they closed down 1.84 percent at $87.34 in New York.
Votorantim posted a loss in early October of nearly $1 billion in the currency derivatives markets, hit by the quick depreciation of the Brazilian real (BRBY) against the U.S. dollar as global financial markets deteriorated.
But Fernando Reinach, executive director of Votorantim Novos Negocios, said the deal had nothing to do with the credit crisis. (Editing by Peter Murphy and Andre Grenon)
