Just 11 months after it sold its styrenics businesses, Monsanto Co. has dropped the other shoe. In a statement Oct. 10, the St. Louis firm said it is conducting a strategic review of its chemical businesses, and is considering options such as separating itself into two public companies, selling its chemicals businesses as a single unit or in pieces, or keeping those businesses and restructuring them.
The company's chemicals businesses reported $2.6 billion in sales last year, and include nylon fibers and resins, phosphate products, its trademarked Saflex products, which are used in transportation and architectural safety glass, and specialty chemicals.
Monsanto produces about 140 million pounds of nylon resins and about 300 million pounds of nylon fibers a year. Industry executives said it has about 30 million pounds of swing capacity between its fiber and resins businesses, so it could produce as much as 170 million pounds of resins a year.
Monsanto said if it chooses to form two public companies, one would be involved in life sciences - the pharmaceutical, health-care, agricultural and biotechnology businesses - while the other would be a specialty chemicals company. Life sciences contributed 69 percent - $5.8 billion - of the corporation's 1995 $8.4 billion in sales.
``They've made a strategic decision to go into the medical and agricultural businesses, and they seem very pleased with the stock appreciation they have seen since making that decision,'' Austin Peppin, an industry consultant and analyst, said in an interview Oct. 15.
Peppin owns Peppin & Asso-ciates Inc. of St. Louis. The company specializes in market and technology consulting for nylon resins and products made of nylon.
``These chemicals businesses that they have can't reach the goals they've set for their company. They can only do that in the drug and food and medical sector,'' Peppin said.
``Those of us who know and have been long observers of the company have read the tea leaves and saw the strategic direction they're going in. They want a return on investment of more than 20 percent, and they want to drive the stock prices up,'' he said.
``You can't do that with these chemicals businesses,'' Peppin said.
PaineWebber chemical industry analyst Paul Raman said he believes Monsanto may choose to sell off its chemicals businesses in three or four pieces because that option will give the company the fastest returns for its efforts.
Monsanto sold its $700 million a year styrenics businesses to Bayer Corp. of Pittsburgh for $580 million in November 1995..