monsanto deruiter_seed_acquisition


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monsanto deruiter_seed_acquisition

  1. 1. DE RUITER SEEDS ACQUISITION March 31, 2008
  2. 2. Forward-Looking Statements Certain statements contained in this presentation are quot;forward-looking statements,quot; such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent reports on Forms 10-Q and 10-K. Undue reliance should not be placed on these forward- looking statements, which are current only as of the date of this presentation. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. All other trademarks are the property of their respective owners. © 2008 Monsanto Company
  3. 3. OVERVIEW De Ruiter Seeds Fits Well Into Monsanto’s Acquisition Strategy of Value Differentiation Through Innovation INVESTMENT OPPORTUNITY In an expanding agriculture environment, value is defined by scarcity or innovation – Monsanto’s strategy is targeted on innovation: discovering and developing technology that is game-changing CATEGORY EXAMPLES OUTLOOK ► Delta and Pine Land • ASI and Delta and Pine Land Intensify The Space moving to integration ► American Seeds, Inc. • Strengthen position of the Leading position in (ASI) Companies protected-culture established core business, largely by ► Agroeste (Brazil) in vegetables building the germplasm ► De Ruiter Seeds • Continued opportunity for footprint of seeds add-on international corn and vegetable seed companies ► Seminis • Continually looking for areas Expand The Space where Monsanto can apply core technology quickly or Expansion to adjacent spaces benefit from advanced – where core technology can research be applied quickly and with transformational benefits ► Yield and Stress R&D • Most highly transformational, Redefine The Space but rarest to find appropriate Collaboration with BASF fit Investments that rewrite the ► SmartStax agreement with landscape, providing new Dow avenues, new technologies ► Global Seed Treatment and creating new markets Alliances 3
  4. 4. OVERVIEW De Ruiter Seeds Accelerates Monsanto Vegetable Seed Capability and Reach, Bolstering Five-Year Growth Prospects Core rationale for bringing De Ruiter Seeds and Seminis together: Monsanto’s vegetable seed foundation is strong and momentum is growing With a streamlined portfolio and working-capital focus, the commercial backbone for Monsanto’s vegetable seeds is stronger than it’s ever been. Strategic growth initiatives are in place to boost price and drive a richer product mix, translating top-line growth to improved margins. De Ruiter Seeds addition is transformational – providing a leading global position for the high-growth protected-culture segment that Seminis lacked The protected-culture segment is a premium-priced, high-growth segment where De Ruiter Seeds excels, holding a leading global position. Combined with Seminis’ open-field product portfolio, Monsanto’s vegetable seed portfolio is further diversified and better positioned to capture growth. Monsanto Vegetable Seeds has greater germplasm depth and diversity With leading positions in open-field and protected-culture germplasm, Monsanto has a deep and diverse genetic pool that improves breeding opportunities, speeds product development and helps create products that bring unique value to farmers. Molecular markers create even greater differentiation The infrastructure already in place for using molecular markers in vegetables is an immediate jump-start for De Ruiter Seeds and promises even greater return across the total vegetable seed portfolio. Addition of De Ruiter Seeds boosts vegetable seed growth outlook, increasing both revenue and gross profit projections by more than 20% through 2012 versus original forecasts 4
  5. 5. OVERVIEW Key Elements of the De Ruiter Seeds Acquisition Agreement • De Ruiter Seeds, leading international protected-culture vegetable seed company, helps address gap in Monsanto’s vegetable and fruit seed portfolio in this fast-growing segment OPPORTUNITY • Molecular markers developed within Seminis have immediate applicability • Improves opportunity to capture consumer benefit value created • Monsanto fruit and vegetable seed business expected to grow to $1B in revenues by 2012 with addition of De Ruiter Seeds • Monsanto signs a definitive agreement to acquire De Ruiter Seeds for €546M, (greater than $800M, depending on currency), less net debt, at a 15X 2007 EBITDA multiple • Monsanto expects to fund the transaction with cash FINANCIAL • Expected to be break even in first full fiscal year and accretive in second full TERMS fiscal year following closing • Positive contribution to operating cash in the first fiscal year following closing • Purchase-accounting adjustments expected for inventory step-up and in- process R&D • Consolidation of back-office functionality, intended to speed conversion to Monsanto systems • The proposed acquisition requires review and approval by the appropriate NEXT STEPS international regulatory authorities. Because of these required regulatory approvals, no timeframe has been announced for the closing of this transaction. 5
  6. 6. OVERVIEW De Ruiter Seeds Is Proven Industry Leader, Delivering Strong Financial Performance with Outlook for Continued Growth DE RUITER SEEDS: Key Financial Data1 2005 2006 2007 NET SALES $118.6M $131.0M $144.7M GROSS PROFIT $94.3M $103.6M $115.8M GROSS PROFIT AS % 79% 79% 80% OF SALES 1. De Ruiter Seeds financial performance collected in Euros according to the accounting standards of Dutch regulation. Historical data has been converted to dollars using a consistent conversion rate of 1 Euro€ = 1.33 $US. All data is presented for calendar years. DE RUITER SEEDS: DE RUITER SEEDS: Products Business Reach • Leading international vegetable seed • Family owned; based 15.3% company in high-margin, growing in Bergschenhoek, The 33.2% protected-culture segment Netherlands • #1 position in tomatoes, rootstock for tomato • Current sales primarily 18.9% breeding from Europe • Top 5 presence: cucumbers, peppers • Excellent relationships with early-adopter 32.6% customer base Northern Europe Southern Europe Americas Others Source: De Ruiter Seeds 6
  7. 7. OVERVIEW Addition of De Ruiter Seeds Creates Balanced, Three- Channel Approach to Vegetable Seed Opportunities MONSANTO FRUIT AND VEGETABLE SEEDS: 3 Focused Channels GLOBAL BRAND: International Seed Group (ISG) CORE • Protected culture market • Open field and protected culture • Open-field cultivation INDUSTRY • Premier brand and market leader • Regionally focused brands, • Largest global vegetable germplasm SEGMENT: in segment which maintain independent base sales forces, unique distribution • Distinct protected-culture • First-mover advantage in molecular channels and brand identities customer base markers INDUSTRY • >$600M in protected-culture • >$2B in open-field segment sales SEGMENT segment sales • Industry growth rate of 4% CAGR, SCOPE: • Segment growing at estimated 8- with Seminis’ overall growth of 6% 10% CAGR CAGR BUSINESS • ISG companies continue to • Established portfolio, focused on • Focus on operational excellence STRUCTURE: leverage Monsanto’s capital and core crops: tomato, sweet pepper, complete – inventory and back- technology resources for their cucumber office integration with Monsanto in local market segments in both place • 75%+ margins open field and protected culture • Streamlined portfolio focused on 25 • Organizational focus on higher- core crops technology customer base maintained • Quickly move to common back- office systems and processes to align with Monsanto’s standard systems • Existing markers have immediate • By 2009, Seminis should have 1,500 • Access to Monsanto R&D Technology Engine application markers in 9 core crops, 2,500 platform helps speed products MOLECULAR markers in tomatoes and peppers can be brought to market and • Markers help unlock consumer MARKER creation of distinct products for • Markers for agronomic and quality OPPORTUNITY: and nutrition characteristics that this specific channel move downstream value into the characteristics boost the seed value seed to growers – allowing greater opportunity to price to value 7
  8. 8. OVERVIEW De Ruiter Seeds Helps Address Gap in Monsanto Vegetable Seed Portfolio in Growing Protected-Culture Segment Portfolio Composition: Portfolio Composition: Percent of Sales1 Percent of Sales1 10% 12% Open-Field Protected-Culture 88% 90% Pairing Seminis with De Ruiter Seeds brings together the leading positions in open-field and protected-culture segments • Both segments benefit from the coordinated 1. Size of pies not to scale with revenue molecular breeding infrastructure generated by Seminis or De Ruiter Seeds 8
  9. 9. PROTECTED CULTURE Year-Round Demand for Produce One of Several Factors Driving Growth in Protected-Culture Segment VEGETABLE INDUSTRY: PROTECTED CULTURE: High-Margin Growth 2007 Sales by Segment1 PROTECTED CULTURE: $US in billions The use of enclosed structures to mitigate disruption to production caused by $0.1 agronomic factors such as rainfall, >80% Gross Margin exposure to diseases or viruses, and insects $0.5 70-80% Gross Margin SEGMENT OPPORTUNITY: Segment projected to grow at approximately 8-10% CAGR over next 5- years $2.4 Premium-priced seed segment, with 55-65% Gross Margin margins +75% KEY DRIVERS OF SEGMENT GROWTH: ► Year-round fresh produce demand in Europe and North America ► Improvements in diets in Asia Pacific and increased demands for vegetables Glasshouse Netted and Plastic Open Field ► Farmers’ growing interest in protecting crops and driving yield 1. Monsanto estimates 9
  10. 10. PROTECTED CULTURE Protected-Culture Seeds Serve High-Tech Veggie Growers; Command Significant Premium Over Open-Field Seed PROTECTED CULTURE VALUE: TOMATO EXAMPLE INPUT COST/ REVENUE/ SEED SEED YIELD/ACRE ACRE ACRE RATE/ACRE1 COST/ACRE OPEN-FIELD 32 tons $1.6K $2.4K 6Mx $42 PLASTIC HOUSE 57 tons $26K $32K 10Mx $1200 PROTECTED- CULTURE GLASS HOUSE 230 tons $180K $207K 14Mx $2600 PROTECTED-CULTURE PROTECTED-CULTURE VALUE CREATION Because of added value from 30 increased yield and quality, VALUE PER ACRE AVERAGE SEED 25 premium on greenhouse tomato (INDEXED) seed is 26X seed for open-field 20 cultivation 15 In protected-culture cultivation, 10 growers raise crops indoors for 5 controlled environment, consistent 0 quality and less pressure from OPEN-FIELD PLASTIC HOUSE GREENHOUSE insects and disease TOMATOES 1. Mx = 1000 seeds
  11. 11. PROTECTED CULTURE Vegetable Seed Business On Track; De Ruiter Seeds Boosts Achievement of Identified Goals VALUE CREATION FOR VEGETABLE SEED PLATFORM: STAGED OPPORTUNITIES FOR INCREASING GROSS PROFIT VALUE CREATION OPPORTUNITY New product launches; use of molecular markers Aggressively shift mix via protected culture and hybrid conversion Identify and implement opportunities to price products to value Assemble genetic maps for key crops Focus on operational excellence; working capital management 2007 2008 2009 2010 2011 2012 PIPELINE OPERATIONAL EXCELLENCE NEW VALUE CREATION ADVANCEMENT ~2010 2012 2007 De Ruiter Seeds accretive to Monsanto vegetable Monsanto vegetable Monsanto vegetable seed EPS seeds projected to seed sales top contribution in second full fiscal be >$1B in sales, $600M in 2007; 7.5% year following closing mid-60s margin top-line growth 2008 2012 De Ruiter Seeds Molecular marker platform acquisition announced – begins transforming strengthens protected- Seminis and De Ruiter portfolios culture portfolio 11