St. Louis, Missouri and São Paulo,
Brazil
November 3, 2008
Companies to combine their
expertise to enhance production of sugarcane and biofuels to
meet growing global demands
In the face of long-term changes driving greater global demand
for food and biofuel sources,
Monsanto Company (NYSE: MON) is investing in a new
large-acre row crop, sugarcane, to diversify its existing core
crop portfolio and to leverage its experience in bringing
innovations to the agricultural marketplace through breeding and
biotechnology. Monsanto announced today that it has entered into
a definitive agreement to acquire Aly Participacoes Ltda., which
operates the sugarcane breeding and technology companies,
CanaVialis S.A. and
Alellyx S.A., both of
which are based in Brazil.
Monsanto's $290 million (R$616 million) acquisition of Aly
Participacoes Ltda. from Votorantim Novos Negocios Ltda. and its
sister company, Votorantim Industrial S.A., will be consummated
with existing excess cash. Both Votorantim Novos Negocios Ltda.
and Votorantim Industrial S.A. are part of the Brazilian
industrial conglomerate, Votorantim Participacoes S.A. (commonly
referred to as the Votorantim Group). The transaction will be
completed as soon as practical.
"Global demands for raw sugar and biofuels are beginning to rise
at a faster pace than the current production levels in
sugarcane, a crop that is essential to meeting these demands,"
said Carl Casale, executive vice president of global strategy
and operations for Monsanto. "Similar to our work with
technology collaborators, we expect the additions of CanaVialis
and Alellyx will allow us to combine our breeding expertise with
key large-acre crops with their breeding expertise in sugarcane.
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. We view this as a significant opportunity over the
longer term to supplement our ongoing commitment to corn as an
ethanol feedstock, diversify our crop technology portfolio and
provide innovations to such a vital crop as sugarcane."
For Fernando Reinach, executive director of Votorantim Novos
Negocios, the acquisitions of CanaVialis and Alellyx by Monsanto
will allow the companies to reinforce their technology
portfolio, which will help Brazil meet the demand for sugar and
ethanol in the intermediate and long terms. "Monsanto's
expertise in advanced breeding and trait development combined
with CanaVialis' and Alellyx's knowledge of the genetics of
sugarcane will help growers to substantially increase
productivity in a shorter period of time,"
said Reinach.
Sugarcane is a giant perennial plant that typically grows best
in tropical climates. As the major source of sugar around the
world, sugarcane is planted on more than 50 million acres
worldwide, with more than 17 million of those acres residing in
Brazil.
CanaVialis is the world's largest private sugarcane breeding
company. Through its breeding activities, CanaVialis is
developing and commercializing proprietary germplasm, or a
plant's genetic raw material, that is anticipated to bring
significant yields to sugarcane over publicly available
varieties.
Alellyx is an applied genomics company that is focused on
developing biotech traits primarily for sugarcane. Their
location and expertise in Brazil are especially important, as
Brazil is the world's largest producer of sugarcane, the largest
exporter of finished sugar, and the world's second-largest
producer of ethanol after the United States.
"While we see this move as a long-term investment and a
commitment to populating our research and development pipeline,
we expect to receive the near-term benefit of access to leading
sugarcane germplasm technologies, which can help us accelerate
the timeframe for bringing trait technologies to market,
possibly around 2016, and bring this germplasm to other
sugarcane- growing areas of the world," said Casale.
Because the acquisition represents a long-term investment in
research and development (R&D) and breeding, the company does
not expect the acquisition to be accretive to earnings until the
middle of the next decade. The company additionally expects a
purchase-accounting adjustment for in-process R&D.
The global demand for sugar has intensified in recent years. The
International Sugar Organization estimated earlier this year
that the world will consume 3.9 million tons more sugar than it
will produce in 2008-2009.
And both the United Nations' Food and Agricultural Organization
(FAO) and the Food and Agricultural Policy Research Institute
(FAPRI) see sugar consumption increasing faster than production
over the next decade. As for the world's growing ethanol
demands, the FAO and the Organisation for Economic Co- operation
and Development project that global ethanol production will
increase rapidly and reach roughly 125 billion liters in 2017,
twice the quantity produced in 2007.
Monsanto previously established a licensing and
trait-collaboration agreement with CanaVialis and Alellyx in
2007 to develop and commercialize Roundup Ready and Bt
insect-protected technologies for sugarcane growers in Brazil.
Monsanto intends to retain the leadership and the approximately
250 employees at the two companies and focus on development of
the businesses.
The pending acquisitions of CanaVialis and Alellyx represent the
third major investment Monsanto has made in Brazil over the past
year and reaffirm Monsanto's commitment to Brazilian
agriculture. In 2007, Monsanto acquired Agroeste, a Brazilian
corn seed company, and announced $60 million in investments to
expand its seeds research and production. Additional information
about this acquisition may be found at
http://www.monsanto.com/investors.
CanaVialis S.A.
was created in March 2003 from a partnership between
Votorantim Novos Negocios and a group of scientists with more
than 30 years of experience in the development of sugarcane
varieties. CanaVialis has contracts with 46 sugarcane mills
whose production area covers 1,100,000 hectares, or
approximately 15 percent of the planted sugarcane market share.
Alellyx S.A. was
created in 2002 by researchers involved in the sequencing of
sugarcane and Xylella fastidiosa genomes. Xylella is the
bacterium that causes Citrus Variegated Chlorosis, a disease
that during the 1990s affected two- thirds of orange plantations
in Sao Paulo.
Monsanto Company is a leading global provider of
technology-based solutions and agricultural products that
improve farm productivity and food quality.
Monsanto remains focused on enabling both small-holder and
large- scale farmers to produce more from their land while
conserving more of our world's natural resources such as water
and energy. |
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