Monsanto is cutting off its agricultural arm so it can walk free of the weight that has been dragging down the company.
The company has announced plans to merge with pharmaceutical firm Pharmacia and Upjohn in the next six months.
Part of the merger will separate the struggling agricultural wing of Monsanto by organizing it as a separate company.
The new agricultural biotechnology company will have its own board of directors and its shares will be traded independently from the pharmaceutical firm formed by the merger.
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University of Saskatchewan agricultural economist Peter Phillips said it is unclear whether there will be real impact for farmers from the merger-split.
But he said the problems that forced Monsanto into the deal show how the tides have turned against the dream of forming integrated pharmaceutical-agricultural biotech companies.
“A few years back everyone got excited about this notion of a life sciences company,” said Phillips.
“But it’s not clear if any of these companies realized the synergies they expected they would.”
Major pharmaceutical manufacturers have been buying and merging with agricultural biotechnology companies to build scientific powerhouses.
Dow bought seed company Mycogen and DuPont bought Pioneer Hi-Bred. Monsanto went on a buying spree, picking up a number of smaller seed and biotechnology companies.
But though genetically modified crops have had huge success in taking over a substantial percentage of the seed market in canola, corn, soybeans and potatoes, they have run into flak from the European Union, which has complicated entry requirements.
Recently, some major American food processors have begun accepting only non-genetically modified potatoes, and consumer resistance to GM crops appears to be building.
According to most market analysts, Monsanto’s share price has been beaten down by its agricultural wing and that has made shareholders angry.
Some have demanded the company split into two, so the true value of both sides of the company can be realized.
Biotechnological breakthroughs, such as Monsanto’s Roundup Ready crops, demand enormous amounts of research and development.
Phillips said Monsanto has invested about $8 billion (U.S.) in biotechnology, and recovering that cost has not worked as well as the company hoped.
But Monsanto spokesperson Lori Fisher said the new agricultural company formed after the merger will continue to heavily invest.
“There will still be a very, very strong research and development commitment to the agricultural business to the tune of about $600 million a year,” said Fisher.
“(Farmers) can continue to expect the kind of innovative products that Monsanto has been known for.”
Phillips said forming two new companies could have another advantage for Monsanto, which has been besieged by bad publicity over GM foods: anonymity.
The new companies will probably have new names, which will get rid of the one that has become such a lightning rod for anti GM activists.
“Monsanto has become something of a dirty word,” said Phillips.
