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Filsco: The latest in fully integrated concepts

OXFORD - One element of the hype surrounding American Home Products Corp. and Monsanto Co.'s merger agreement as a huge biotech opportunity rings especially true: as in most biotech stories, any major value addition to shareholder fortunes is likely to be in the long term rather than the near term.

With mega-mergers back in favor in the late '90s, the questions raised about conglomerates several decades ago by now may have been forgotten. One of the central issues raised by those earlier mega-companies is whether combining disparate businesses under one roof resulted in cost savings, cross-fertilization and synergies, or whether the conglomerates were merely reflections of a shared ownership without any particular value added.

In the case of Monsanto-AHP, the initial hype suggests that the merger of the two businesses into a fully integrated life sciences multinational has a strategic rationale. However complementarity does not equal synergy, raising the question of what advantages will be gained through the combination.

On the surface, one might have thought that a swap of American Cyanamid for Searle creating one agbio company and one pharmaceutical company might have made more sense. AHP is a pharmaceuticals company that happens to have a modest agrochemicals business; Monsanto is now the major player in the agrochemicals and seeds industry with a small pharmaceuticals arm, albeit one that is within reach of the market with several products.

Monsanto-AHP does appear to have established downstream - close to market - clout through seeds, foods and pharma marketing capacity. But given their disparate audiences, these are hardly synergistic resources.

And while the use of crops to produce

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