CONFIDENTIAL
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PRESENTATION TO DOW/DAS
August 3, 1998
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION
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TABLE OF CONTENTS
1. Mycogen Business Unit - Key Drivers of Growth
2. Discounted Cash Flow Analysis - Process and Methodology
3. Results of DCF Valuation
4. Comparable Analysis
5. Conclusions
6. Appendix:
A. Summary of Financial Projections
B. Comparable Analysis
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION
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----------------------------------------
Mycogen Business Units -
Key Drivers of Growth
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WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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OVERVIEW
BUSINESS DESCRIPTION
- - A DIVERSIFIED AGRIBUSINESS AND BIOTECHNOLOGY COMPANY THAT DEVELOPS AND
MARKETS SEED FOR IMPROVED CROP VARIETIES AND PROVIDES CROP PROTECTION
SERVICES
BUSINESS SEGMENTS
- - SEED SEGMENT -- PRODUCES AND MARKETS SEED FOR MAJOR AGRICULTURAL CROPS AND
USES BIOTECHNOLOGY AND TRADITIONAL AND MARKER-ASSISTED BREEDING TO DEVELOP
CROP VARIETIES WITH GENETICALLY ENHANCED PEST AND DISEASE RESISTANCE,
IMPROVED VEGETABLE OIL PROFILES AND OTHER VALUE-ADDED CHARACTERISTICS
- Mycogen Seeds ranks fourth in the U.S. in sales of seed corn, second in
hybrid sunflower seed sales and is among the top five in soybean,
sorghum and alfalfa sales
- Morgan Seeds ranks second in Argentina in seed corn sales and third in
hybrid sunflower seed sales
- Dinamilho holds a 10.2% share of Brazil's high-tech corn seed market
and 4% of Brazil's overall corn seed market. Three additional
acquisitions to close in 1998 will enhance Mycogen's position in this
attractive and growing market
- - CROP PROTECTION SEGMENT -- MANUFACTURES AND MARKETS ENVIRONMENTALLY
COMPATIBLE SPRAY-ON BIOPESTICIDES. ALSO OPERATES SOILSERV, INC., A CROP
PROTECTION SERVICE FOR HIGH-VALUE CROPS
- Biopesticide Products -- based on natural agents, such as proteins and
fatty acid compounds, that have specific toxic activity on target
pests. The Company's Bt-based biopesticides use the Company's
proprietary Cellcap technology
- Soilserv -- monitors fields and uses customized equipment to apply pest
control products primarily in the Salinas Valley, CA and Yuma, AZ
regions
ALLIANCES
- - VERNEUIL HOLDING, S.A. -- MYCOGEN HOLDS A 35% EQUITY STAKE IN VERNEUIL AND
ENTERED INTO AN AGREEMENT WITH VERNEUIL TO DEVELOP OILSEED PRODUCTS AND
INSECT RESISTANT CORN
- - PIONEER HYBRID INTERNATIONAL -- 10-YEAR TECHNOLOGY COLLABORATION TO
DEVELOP INSECT RESISTANT TRAITS FOR CORN, SOYBEAN, CANOLA, SUNFLOWER,
SORGHUM AND WHEAT
- - J.G. BOSWELL -- JOINT VENTURE TO DEVELOP PEST AND HERBICIDE RESISTANT
COTTON
HEADQUARTERS
- - SAN DIEGO, CA
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY DRIVERS OF GROWTH
TECHNOLOGY AND COMPETITIVE POSITION
- - BT TECHNOLOGY, A CORNERSTONE OF MYCOGEN'S COMMERCIAL FUTURE, IS THE BEST
PROVED METHOD FOR GENETICALLY IMPROVING SEED TRAITS
- Bt is the best characterized transgenic technology that has been
applied to genetically modify seed. Despite continuing environmental
concerns, Bt genes are expected to be present in nearly 50% of all
corn and 30% of all soybean seed by 2000
- Bt is a proven technology. Bt seeds have been shown to prevent insect
damage and lower insecticide costs in a manner that does not destroy the
natural ecological balance as chemical insecticides do
- - MYCOGEN IS THE MARKET LEADER IN DEVELOPING NEW INSECTICIDAL AND HERBICIDAL
RESISTANCE TRAITS
- Mycogen is the undisputed leader in the identification and
characterization of new Bt and related insecticidal proteins
- Mycogen holds patents to over 100 Bt genes with specificities toward
over 40 groups of insects. Many of these genes are likely to have
commercial applications against chewing insects, piercing and sucking
insects, and even nematodes
- Mycogen has a strong IP position in a number of technologies capable of
improving the disease resistance and output characteristics of a variety
of crops. Additionally, use of the proven Ahlquist technology promises to
extend the use of Bt to include the attractive market for high-value
perennial crops such as vines, and orchards
- - MYCOGEN'S INTELLECTUAL PROPERTY POSITION AND INTELLECTUAL CAPITAL IS AMONG
THE BEST IN THE AGROBIOTECH INDUSTRY
- Mycogen has one of the best molecular biology IP positions amongst
plant biotechnology companies. Mycogen's array of promoters, expression
cassettes, markers, and reporter gene libraries provides critical mass
to any third party in the arena
- Newer applications, such oral immunity, are promising and provide a
strong platform to pursue sizable commercial opportunities. These
technologies are likely to command a premium price from many interested
parties
- Mycogen's scientific and operating personnel represent a significant
asset to any interested party. However, increased spending by
competitors (such as Novartis as part of it's Plant Genome Initiative),
could hamper the retention of quality personnel at Mycogen
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY DRIVERS OF GROWTH
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PRICING AND MARGINS
- -------------------
- TRAITS INTRODUCED INTO EXISTING SEED SALES ADD REVENUES AND
REQUIRE R&D EXPENSES BUT DO NOT REQUIRE A COMMENSURATE INCREASE
IN SG&A
- Seed traits are sold as a part of existing conventional seeds.
There is no additional SG&A expense and these traits essentially
add revenues that, net of R&D expenses, directly impact the
bottom line
- Bt Cotton seed hybrids, capable of conferring resistance to
common cotton pests, command a price 230% that of conventional
cotton seed despite having the same manufacturing cost
- PRICING FOR NEW TRAITS IS BASED ON CAPTURING A PORTION OF THE
INCREASED VALUE OF THE IMPROVED SEED TO END-USERS SUCH AS FARMERS
AND FOOD PROCESSORS
- Mycogen has developed pricing assumptions for traits in
development that are based on their ability to decrease growing
costs or increase value for end-users. Conservative estimates of
the portion of value captured by Mycogen, based on Mycogen's
business plan, have been applied in the accompanying projections
- Similar pricing assumptions can be found in reports of analysts
who follow the agrobiotech sector
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ADOPTION RATES
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- BIOTECH TRAITS ARE ASSUMED TO BE SOLD THROUGH EXISTING MYCOGEN
SEED DISTRIBUTION CAPABILITIES
- Consistent with the operating model assumptions, traits are
assumed to be primarily sold in Mycogen seed through Mycogen's
existing seed distribution network. The impact of additional
sales created as a result of add-on acquisitions, other than
those expected to close in 1998, have not been included
- In certain cases, where business judgment suggests opportunity,
additional sales have been shown through third-party channels.
However, these sales are recorded only after including a
substantial discount (11%-50%), and represent only a small
fraction of both Mycogen's sales and total third-party sales
(typically less than 5%)
- ADOPTION RATES FOR NEWLY INTRODUCED TRAITS ARE CONSERVATIVELY
MODELED BASED ON OBSERVED ADOPTION RATES FOR EXISTING BIOTECH
TRAITS
- Adoption rates for traits into existing Mycogen seed sales base
are modeled using the observed rate for adoption of existing Bt
seed strains. Current data suggest that adoption has been rapid
and there is reason to believe that the adoption rate is likely
to speed up rather than slow down
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY DRIVERS OF GROWTH
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MARKET SHARE
- ------------
- MYCOGEN SEEDS HAVE A STRONG PRESENCE IN THE U.S. MARKET FOR MAJOR
ROW CROPS
- Mycogen currently commands about 5.2% of the U.S. corn market
- Mycogen seeds are planted on nearly 10% of all U.S. farms, a
high trial rate which suggests an expansion of Mycogen's market
share
- Mycogen's existing network of breeding stations throughout the
U.S., Puerto Rico, Brazil and Argentina provides the necessary
diversity of seed germplasm to provide a year-round supply of
seed with desired maturity, standability, water requirements,
storage properties and other characteristics
- MYCOGEN'S MARKET SHARE IS EXPECTED TO RISE DRIVEN BY ITS LEADING
HIGH-YIELDING HYBRIDS
- Yield is a primary determinant of adoption. In a little over
three years, Mycogen's corn hybrids have become amongst the
highest yielding hybrids currently available (see graph overleaf)
- Recent market indicators show Mycogen gaining in market share
relative to competitors. With the planned continuation of
current efforts, this trend is highly likely to remain in place
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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COMPETITIVE CHARACTERISTICS OF RECENT MYCOGEN CORN HYBRIDS (YIELD IN BUSHELS
PER ACRE)
TRIAL 100-106 RM
Novartis MAX747 169
NK4242CBR 176
Mycogen x27500 172
P3730 166
Mycogen 2545 167
Mycogen x28560 191
Mycogen x28580 183
DK493Bt 180
NK4640CBR 187
DK512 177
Novartis MAX88 166
Mycogen 2598 190
P35N05 197
TRIAL 108-114 RM
DK566Bt 178
P3489 175
Novartis MAX21 170
DK580Bt 178
Mycogen 2717 203
Mycogen G28730 198
Mycogen 2722 182
Mycogen 7059 179
Novartis MAX454 161
P34R06 184
Mycogen 2787 188
P3335 192
Mycogen 2801 187
Mycogen 7250 185
NK6800CBR 174
P33A14 212
Golden H. H2530Bt 170
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Data: Bt Corn yield based on multiple independent Mycogen trials.
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY BUSINESS SEGMENTS
- -------------------
CONVENTIONAL SEED -
CORN AND SOYBEAN
- -------------------
- THE CONVENTIONAL SEED BUSINESS FORMS THE BASIS FOR DISTRIBUTION OF
MYCOGEN TRAITS AND PROVIDES IMMEDIATE CASH FLOW TO OFFSET R&D
EXPENDITURES
- CONVENTIONAL SEED BUSINESS VALUE IS CONCENTRATED WITHIN NORTH
AMERICA AND BRAZIL. THIS IS BECAUSE SEED BUSINESSES NEED A
CRITICAL MARKET SHARE (TYPICALLY AROUND 5%) BEFORE THEY CAN SHOW
POSITIVE NET INCOME. BOTH NORTH AMERICA AND BRAZIL HAVE REACHED
THIS CRITICAL MARKET SHARE
- CORN AND SOYBEAN ARE THE MAJOR CROPS PLANTED IN NORTH AMERICA AND
BRAZIL. THEY REPRESENT MOST OF THE REVENUE AND MOST OF THE FIXED
AND VARIABLE COSTS
- -----------------
CORN EARLY TRAITS
- -----------------
- MYCOGEN'S MARKET SHARE IN THE NORTH AMERICAN CORN MARKET AND THE
ATTRACTIVE GROWTH PROSPECTS FOR MYCOGEN'S NEW CORN HYBRIDS PROVIDE
A STRONG BASE TO PROPEL SALES OF EARLY TRAITS
- MYCOGEN'S EXPERIENCE WITH TRANSFORMING CORN AND GAINING SUITABLE
EXPRESSION OF TRANSGENIC BT PROVIDES A COMPETITIVE ADVANTAGE IN
THE INTRODUCTION OF NEW BT-BASED EARLY TRAITS
- ---------------------
SOYBEAN OUTPUT TRAITS
- ---------------------
- IMPROVED SOYBEAN NUTRITIVE CONTENT WILL RESULT IN SOYBEAN FARMERS
AND PROCESSORS PAYING SIGNIFICANT PREMIUMS FOR SEED
- Soybean processing for food additives and protein
supplements/substitutes is a large and growing industry. Feed
is the primary driver of soybean value. There is significant
potential to increase soybean nutritive content (e.g. protein,
amino acid composition and processing characteristics) that
will significantly increase value for end-users
- Mycogen has access to various technologies, including
proprietary technologies from Demeter, that are capable of
improving soybean nutritive content. The potential for higher
prices from sales into Mycogen and third-party channels is a
significant source of value
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MYCOGEN CORPORATION
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DCF ANALYSIS-
PROCESS AND METHODOLOGY
---------------------------------
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MYCOGEN CORPORATION VALUATION: PROCESS AND METHODOLOGY
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FINANCIAL PROJECTION METHODOLOGY
- - THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF MYCOGEN HAS AUTHORIZED
WP&CO. TO UNDERTAKE A COMPREHENSIVE REVIEW OF MYCOGEN'S PRODUCTS AND
DEVELOPMENT PORTFOLIO
- - WP&CO. HAS CONDUCTED LENGTHY DUE DILIGENCE VISITS AND REVIEWED THE
FOLLOWING INDUSTRY AND COMPANY DOCUMENTS
- Company financial projections and business unit plans - current
projections, primarily based on existing Bt traits and the conventional
seed business. Also, strategic plans for all major business units,
including startup plans for businesses based on early stage technologies
and promising IP platforms
- Company and Competitor Financial Publications - Company/analyst
estimates for comparable operating ratios and projections
- R&D Gap Analysis and Independent Committee Documents - Internal
management and scientific expert review of company strategy, R&D
portfolio, including early stage pipeline, IP portfolio, and required
funding levels to support various programs
- Mycogen Partners Presentations: presentations by Mycogen partners
specifically relating to joint ventures. These include AC Humko,
Verneuil Mycogen, Morgan Seeds and Dinamilho
- Dow Presentations and Valuations: Analysis and valuation models built
by Dow in collaboration with Mycogen with respect to potential Mycogen
opportunities. Includes Dow Argentina opportunity analysis, Phytogen JV
analysis and the Dow/RCW Consultores Brazil market analysis
- Industry Research Reports: Proprietary industry reviews containing
information on competitor offerings, growth and market share. These
include Doane Marketing Research "Report on U.S. Farm Seed Study",
National Corn Growers Association reports, Context Consulting "Report
on Biotech Traits" and Negocios e Mercados "Report on Brazilian Seed
Market"
- Presentations by and interviews with senior management, Special
Committee members, key research personnel, operating management
including business unit managers and sales staff and outside academic
specialists
- - BASED ON INFORMATION COLLECTED FROM THESE SOURCES, WP&CO. AND MYCOGEN
MANAGEMENT MODIFIED COMPANY PROJECTIONS AS NECESSARY TO DEVELOP A SINGLE
SET OF FINANCIAL PROJECTIONS FOR THE 1998-2007 PERIOD BY BUSINESS SEGMENT.
THESE PROJECTIONS ARE THE BASIS FOR THE VALUATIONS DESCRIBED IN THE
SECTION "RESULTS OF DCF VALUATION"
- - THESE PROJECTIONS INCLUDE THE IMPACT OF THREE PENDING ACQUISITIONS IN
BRAZIL. ALTHOUGH THE COMPANY'S CURRENT BALANCE SHEET DOES NOT REFLECT THE
COST OF THESE ACQUISITIONS, OUR BALANCE SHEET HAS INCLUDED THE INCREASE IN
NET DEBT AS A RESULT OF THESE ACQUISITIONS. THERE ARE NO OTHER
ACQUISITIONS CONTRIBUTING TO THESE PROJECTIONS
- - SYNERGIES THAT WOULD RESULT FROM COMBINATION OF MYCOGEN WITH A THIRD
PARTY, THAT WOULD USUALLY BE REALIZED THROUGH AN AUCTION PROCESS, HAVE NOT
BEEN INCLUDED IN THE CURRENT PROJECTIONS. SYNERGIES THAT WOULD BE EXPECTED
IN A COMBINATION WITH DOW HAVE ALSO NOT BEEN INCLUDED IN THE CURRENT
VALUATION OTHER THAN THE EFFICIENT USE OF NET OPERATING LOSSES (NOL'S)
WASSERSTEIN PERELLA & CO.
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MYCOGEN VALUATION: PROCESS AND METHODOLOGY
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FINANCIAL PROJECTION METHODOLOGY
------------------------------ -----------------------------
10-YEAR PROJECTIONS DETAILED BASIS
------------------------------ -----------------------------
------------------------------------------------------
- Includes demographic factors and regional
Target Crop Acreage analysis by crop
X - Shifting planting patterns
------------------------------------------------------
------------------------------------------------------
Market Penetration of Genetically - Adoption value of Bt and output modified seed
Modified Seeds - Presence on farmer's fields
X ------------------------------------------------------
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Market Share of Mycogen Product - Preferred penetration in existing base
X - Access to partners with large share of new
markets
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Mycogen Product Selling Price
= ------------------------------------------------------
- Value capture based on improved
productivity and competitive advantage
Mycogen product Sales Projections ------------------------------------------------------
- ------------------------------------------------------
- Costs reflect minimal additional COGS and
SGA for traits above those for conventional seed
Fixed and Variable Costs and Taxes - R&D investment accelerated to ensure successful
+ timing of products
------------------------------------------------------
------------------------------------------------------
- Based on current inventory and accounts payable/
Cash Flow Impact (-W.I. -CapEx + Dep.) receivable trends
=
- Additional plant expenditure is dependent
Mycogen Product Free Cash Flow on sales levels and existing capacity
------------------------------------------------------
---------------------------------
VALUATION METHODOLOGY
---------------------------------
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MYCOGEN VALUATION: PROCESS AND METHODOLOGY
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VALUATION METHODOLOGY
[GRAPH]
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MYCOGEN VALUATION: PROCESS AND METHODOLOGY
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IMPLICATION OF PROJECTED GROWTH RATE - NORTH AMERICA EXAMPLE
------------- -------------- --------------- ------------------
GROWTH IMPLIED MARKET
CROP RATE EBIT SHARE*
MULTIPLE
------------- -------------- --------------- ------------------
13.6%
-------
3.4%
------
Corn Input 5.0 - 6.5% 3.3 - 4.7x ---------------------------------
1997 2007
3.9%
-----
0%
Soybean Output 5.0 - 6.5% 2.5 - 3.4x ---------------------------------
1997 2007
10%
-------
0%
Disease Resistance 8.0 - 10.0% 1.5 - 3.1x ---------------------------------
(Share of Mycogen 1997 2007
Market)
- --------------------
* Assumes that total market remains constant and revenues / customer are fixed.
WASSERSTEIN PERELLA & CO.
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MYCOGEN CORPORATION VALUATION: PROCESS AND METHODOLOGY
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ILLUSTRATIVE FINANCIAL PROJECTIONS - NORTH AMERICA SOYBEAN TRAIT EXAMPLE
- - MYCOGEN'S FINANCE GROUP IN COLLABORATION WITH INDIVIDUAL BUSINESS UNITS
PREPARED DETAILED FINANCIAL PROJECTIONS INCLUDING PRICING, PENETRATION AND
MARGIN ASSUMPTIONS. A SAMPLE OF THESE PROJECTIONS (FOR THE NORTH AMERICAN
SOYBEAN TRAIT BUSINESS) ARE INCLUDED ON PAGE 17-19
- - WP&CO. EXAMINED THESE PROJECTIONS AND IN CONSULTATION WITH MYCOGEN
MANAGEMENT MODIFIED THEM AS NECESSARY TO ENSURE CONSISTENCY WITH OVERALL
MARKET TRENDS AND AVAILABILITY OF REQUIRED DEVELOPMENT FUNDS. A SAMPLE OF
THE RESULTING PROJECTIONS ARE SHOWN ON PAGE 20.
- Ensure pricing by geographies is comparable and market share of traits
is consistent with planned introduction of stacked traits
- Allow for pricing discounts where third party sales channels or
technology licenses are required
- Relate necessary R&D spending to gap analysis conducted by scientific and
technical planning committee. R&D spending allocated to individual
product lines and independent business units where possible
- Apply consistent operating assumptions to generate cash flows for
individual business units and corporate center
- - THE RESULTING 10-YEAR FINANCIAL PROJECTIONS (INCLUDING 1998) WERE USED TO
ESTIMATE THE VALUE OF EACH LINE OF BUSINESS. ASSUMPTIONS FOR EACH BUSINESS
UNIT WERE APPLIED SO AS TO BE CONSISTENT IN TERMS OF GROWTH RATES, EXPECTED
TERMINAL MULTIPLES AND RISK ADJUSTED DISCOUNT RATES. SAMPLE VALUATION
SUMMARIES FOR THE NORTH AMERICAN SOYBEAN TRAIT BUSINESS UNIT ARE SHOWN ON
PAGE 21
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MYCOGEN CORPORATION VALUATION: PROCESS AND METHODOLOGY
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RECONCILIATION OF PROJECTIONS - CURRENT ESTIMATES VERSUS PRIOR BUSINESS PLANS
- - TIMING: THE PREVIOUS VERSION OF THE MYCOGEN BOARD PLAN WAS PREPARED IN
AUGUST 1997, NEARLY ONE YEAR AGO
- - COMMERCIALIZATION EXPERIENCE AND SUCCESS: IN THE PAST YEAR, MYCOGEN HAS MET
SOLID SUCCESS IN THE COMMERCIALIZATION OF NEW HYBRIDS. THESE GAINS,
PRIMARILY IN DEVELOPING BREEDING PROGRAMS THAT GENERATE QUALITY GERMPLASM
AND ESTABLISHING DEALER AND PARTNER NETWORKS, ARE EXPECTED TO ACCELERATE
THE GAIN OF MARKET SHARE
- Totally Managed Feedstuff (TMF) high-silage corn has been rapidly
accepted by farmers. As a result Mycogen has been able to sign agreements
with over 20 new distributors over the past ten months. This additional
market share will also translate into additional revenues for early,
output and disease resistance traits
- Mycogen's new corn hybrids show yields comparable to the leading Pioneer
hybrids. As a result, Mycogen's prior estimates for corn seed sales in
the 2000-2007 period have been revised slightly upward
- - STRATEGY: MYCOGEN'S STRATEGY FOR THE SOUTH AMERICA MARKET HAS FORGED AHEAD
- Mycogen has made three significant acquisitions in the Brazilian market
that strengthen its presence in this large market. These acquisitions
were not included in the prior business plans
- Considerable improvement has been made in rationalizing customer accounts
in Argentina and Brazil. This is resulting in an improvement in margins
that has not been included in prior business plans
- - NON-CORE CROPS: SIGNIFICANT OPPORTUNITIES EXIST FOR BT TECHNOLOGY IN RICE,
TURF, ALFALFA AND OTHER CROPS. THESE OPPORTUNITIES WHILE NOT INCLUDED IN
PREVIOUS PROJECTIONS, ARE IN CURRENT PROJECTIONS
- - NEW TECHNOLOGIES: MYCOGEN HAS DEVELOPED NEW TECHNOLOGY PLATFORMS THAT ALLOW
IT TO AGGRESSIVELY PURSUE NEW OPPORTUNITIES IN OUTPUT TRAIT ENHANCEMENT AND
PLANT DISEASE RESISTANCE
- Demeter, Ahlquist and other transgenic technologies are powerful recent
additions to Mycogen's IP portfolio
- New business opportunities presented by these technologies are sizable
but have not been included in previous business plans
- With Mycogen's increasing experience in plant gene characterization and
expression as well as in breeding elite germplasm, Mycogen is highly
confident that these programs, if adequately funded, will generate
significant value
- - R&D SPENDING: THE PROJECTIONS USED HERE HAVE BEEN DEVELOPED WITH A
BOTTOM-UP APPROACH TO ESTIMATING R&D FUNDING REQUIREMENTS. BASED ON
SCIENTIFIC PERSONNEL ASSESSMENT OF BASIC RESEARCH (GENE CHARACTERIZATION,
PLANT TRANSFORMATION, OPTIMIZATION AND BREEDING) TRAIT-BASED SPENDING
REQUIREMENTS WERE ADDED TO THE TRADITIONAL "PERCENTAGE OF SALES" APPROACH.
OUR MORE CONSERVATIVE APPROACH PLACES THE R&D SPENDING IN 2007 AT $215
MILLION AS OPPOSED TO THE CURRENT BUSINESS PLAN ESTIMATE OF $68 MILLION
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NORTH AMERICAN SEEDS
SOYBEAN TRAITS
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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SOYBEAN TRAITS MARKETED MYCOGEN RETAIL
MYCOGEN UNITS IN THOUSANDS 1,635 1,700 1,921 2,229 2,674 3,209 3,851 4,621 5,776 7,221
LIBERTY HERBICIDE (THIRD PARTY)
Seed premium value capture per bag $ 1.00 $ 1.15 $ 3.25 $ 3.60 $ 4.00 $ 4.40 $ 4.75 $ 5.15
% of Market Share Penetrated 10% 15% 20% 20% 20% 20% 20% 20%
Liberty Revenue per year (000) $192 $384 $1,738 $2,311 $3,081 $4,067 $5,488 $7,437
ROUNDUP READY (THRU NOVARTIS)
Seed premium value capture per bag $ 4.00 $ 5.00 $ 6.00 $ 7.00 $ 7.00 $ 6.00 $ 5.00 $ 5.00
% of Market Share Penetrated 60% 80% 80% 80% 80% 70% 70% 60%
Bt cyst Revenue per year (000) $4,611 $8,914 $12,837 $17,971 $21,565 $19,409 $20,218 $21,662
BT CYST
Seed premium value capture per bag $ 8.00 $ 8.00 $ 9.50 $ 9.50
% of Market Share Penetrated 2% 10% 30% 50%
Bt Cyst Revenue per year (000) $616 $3,697 $16,463 $34,298
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TOTAL REVENUE (000) $4,803 9,299 $14,575 $20,282 $25,262 $27,173 $42,168 $63,397
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ASSUMPTIONS
BT CYST
Market opportunity = 46,000,000 bags
Soybean yields improve 15%
Mycogen retains 25% of increased yield value
LIBERTY HERBICIDE (THIRD PARTY)
Market opportunity = 9,200,000 bags
Liberty seed premium is 50% of RR tech + genetics
Mycogen retains 50% of Liberty seed premium
RR tech fee will increase $1/bag per year, RR genetic increase $.50/bag per
year. Current tech fee $5/bag. RR genetics @ $2/bag
-17-
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NORTH AMERICAN SEEDS
SOYBEAN TRAITS
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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SOYBEAN TRAITS TO THIRD PARTIES
LIBERTY HERBICIDE (THIRD PARTY)
Seed premium value capture per bag $ - $ - $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00
nites (000) 300 400 500 600 700 800
% of market Share Penetrated 0% 0% 1% 1% 1% 1%
Liberty Revenue per year (000) $2 $3 $5 $8 $11 $14
BT CYST
Seed premium value capture per bag $ 5.00 $ 5.00 $ 5.00 $ 5.00
Unites (000) 200 400 1,000 1,500
% of Market Share Penetrated 0% 0% 1% 2%
Bt cyst Revenue per year (000) $1,000 $2,000 $5,000 $7,500
------------------------------------------------------------------------------------------
TOTAL REVENUE (000) $0 $0 $2 $3 $1,005 $2,008 $5,011 $7,514
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GENERTIC ROYALTIES
Trait Related Genetic Royalties 900 1,200 2,100 3,000 5,100 6,900
Non Trait Related Genetic Royalties 85 100 125 150 200 300 300 300 300 300
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TOTAL SUNFLOWER GENETIC ROYALTIES $85 $100 $125 $150 $1,100 $1,500 $2,400 $3,300 $5,400 $7,200
------------------------------------------------------------------------------------------
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ASSUMPTIONS
BT CYST
Market opportunity = 46,000,000 bags
Soybean yields improve 15%
Royalts $5.00/bax
LIBERTY HERBICIDE (THIRD PARTY)
Market opportunity = 9,200,000 bags
Liberty seed premium is 50% of RR tech + genetics
Mycogen LibertyLink genetic royalty $2.00/bag
RR tech fee will increase $1/bag per year, RR genetic increase $.50/bag per
year. Current tech fee $5/bag. RR genetics @ $2/bag
-18-
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NORTH AMERICAN SEEDS
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Note: Sales refers to total soybean sales)
SOYBEAN RESEARCH
Sales Dollars 23,457 26,557 31,473 38,207 47,886 61,130 77,758 98,591 129,841 170,554
SOYBEAN % OF SALES
Hybrid Development
Line Development 3.7% 3.7% 5.1% 5.4% 8.9% 8.3% 7.8% 7.6% 6.9% 6.2%
Trait introgression 0.2% 0.2% 0.4% 0.6% 1.0% 0.9% 0.9% 0.8% 0.8% 0.7%
-----------------------------------------------------------------------------------------------------------
Total % 3.9% 3.9% 5.5% 6.0% 9.9% 9.2% 8.6% 8.4% 7.6% 6.9%
-----------------------------------------------------------------------------------------------------------
SOYBEAN DOLLARS
Hybrid Development 0 0 0 0 0 0 0 0 0 0
Line Development 865 978 1,591 2,075 4,255 5,066 6,031 7,479 8,910 10,617
Trait introgression 46 62 138 231 473 563 670 831 990 1,180
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Total Dollars 911 1,040 1,729 2,306 4,728 5,629 6,701 8,310 9,900 11,797
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TOTAL R&D DOLLARS BY ACTIVITY
Hybrid Development 7,235 8,257 10,796 13,339 17,166 20,425 23,556 30,004 36,700 44,297
Line Development 3,353 4,003 5,198 7,261 10,916 12,988 14,336 17,811 21,197 25,241
Trait introgression 533 648 1,203 2,259 3,169 3,859 6,478 7,178 7,547 8,391
Other 125 120 126 213 295 287 347 427 576 740
-----------------------------------------------------------------------------------------------------------
Total 11,246 13,028 17,323 23,072 31,546 37,559 44,717 55,419 66,021 78,669
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
TOTAL R&D DOLLARS BY CROP
Crn 9,077 10,532 13,662 18,212 23,324 27,768 33,059 40,995 48,840 58,199
Soybeans 911 1,040 1,729 2,306 4,728 5,629 6,701 8,310 9,900 11,797
Sunflowers 1,024 1,171 1,557 2,075 2,837 3,377 4,021 4,986 5,940 7,078
Sorghum 109 165 249 266 362 498 589 701 765 855
Other 125 120 126 213 295 287 347 427 576 740
Total 11,246 13,028 17,323 23,072 31,546 37,559 44,717 55,419 66,021 78,669
-----------------------------------------------------------------------------------------------------------
% of Sales Dollars 11% 11% 12% 13% 14% 14% 14% 14% 14% 13%
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
-19-
MYCOGEN CORPORATION
- -------------------------------------------------------------------------------
N. AMERICA SOYBEAN/SORGHUM INPUT TRAITS REVENUES AND EXPENSES ($MM, EXCEPT PER
UNIT PRICE AND UNITS IN 000S)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Soybean Market (MM Acres) 71 71 71 71 71 71 71 71 71 71
Mycogen Market (Acres) 1,257 1,308 1,478 1,714 2,057 2,469 2,962 3,555 4,443 5,554
LIBERTY HERBICIDE
Gross Price per acre $1.00 $1.15 $3.25 $3.60 $4.00 $4.40 $4,75 $5.15
% Mycogen Penetration 10.0% 15.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
Net Revenues $0.0 $0.0 $0.2 $0.4 $1.7 $2.3 $3.1 $4.1 $5.5 $7.4
% Third Party Penetration- 0.0% 0.0% 0.0% 0.0% 0.5% 0.7% 0.9% 1.1% 1.3% 1.5%
Revenues (@ 55% Disc.) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
ROUNDUP READY (NOVARTIS)
Gross Price per acre $0.00 $0.00 $4.00 $5.00 $6.00 $7.00 $7.00 $6.00 $5.00 $5.00
% Mycogen Penetration 0.0% 0.0% 60.0% 80.0% 80.0% 80.0% 80.0% 70.0% 70.0% 60.0%
Net Revenue $0.0 $0.0 $4.6 $8.9 $12.8 $18.0 $21.6 $19.4 $20.2 $21.7
BT CYST
Gross Price per acre $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $8.00 $8.00 $9.50 $9.50
% Mycogen Penetration 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 10.0% 30.0% 50.0%
Net Revenue $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.6 $3.7 $16.5 $34.3
% Third Party Penetration 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.7% 7.3% 18.3% 27.5%
Revenues (@ 50% Disc.) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.1
Sorghum Market (Acres) 9,500 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Mycogen Market (Acres) 855 969 1,024 1,096 1,160 1,304 1,416 1,555 1,696 1,896
HERBICIDE
Gross Price per acre $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $35.00 $35.00
% Mycogen Penetration 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.0% 10.0%
Net Revenues $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.1 $0.8
TOTAL MYCOGEN REV. $0.0 $0.0 $4.7 $9.1 $13.0 $18.2 $22.4 $23.3 $37.0 $57.0
TOTAL THIRD PARTY REV. $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.1
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL TRAIT REVENUES $0.0 $0.0 $4.7 $9.1 $13.0 $18.2 $22.4 $23.3 $37.1 $57.1
R&D Expenses 0.2 0.2 0.4 0.7 1.4 1.8 2.1 2.1 3.0 4.1
% Sales -- -- 8.9% 7.8% 11.1% 10.1% 9.3% 9.1% 8.1% 7.2%
INCOME BEFORE TAX ($0.2) ($0.2) $4.3 $8.4 $11.6 $16.3 $20.3 $21.2 $34.1 $53.0
Tax @ 41.0% 0.0 0.0 (1.8) (3.4) (4.8) (6.7) (8.3) (8.7) (14.0) (21.7)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
CASH FLOW ($0.2) ($0.2) $2.5 $4.9 $6.8 $9.6 $12.0 $12.5 $20.1 $31.2
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-20-
MYCOGEN CORPORATION
- --------------------------------------------------------------------------------
N. AMERICA SOYBEAN/SORGHUM INPUT TRAITS DISCOUNTED CASH FLOW ANALYSIS
- ------------- -----------------------------------
DISCOUNT RATE YEAR 2007 CASH FLOW GROWTH RATE
- ------------- -----------------------------------
5.0% 5.5% 6.0% 6.5%
----- ----- ----- -----
20.0% PV of Free Cash Flow $24.8 $24.8 $24.8 $24.8
PV of Terminal Multiple 35.3 36.7 38.2 39.8
----- ----- ----- -----
Enterprise Value $60.1 $61.5 $63.0 $64.6
Less: Net Debt 0.0 0.0 0.0 0.0
----- ----- ----- -----
EQUITY VALUE $60.1 $61.5 $63.0 $64.6
IMPLIED PERPETUITY GROWTH 5.0% 5.5% 6.0% 6.5%
% VALUE FROM TERMINAL MULT. 58.8% 59.7% 60.7% 61.6%
22.0% PV of Free Cash Flow $22.0 $22.0 $22.0 $22.0
PV of Terminal Multiple 26.4 27.3 28.3 29.4
----- ----- ----- -----
Enterprise Value $48.4 $49.3 $50.3 $51.4
Less: Net Debt 0.0 0.0 0.0 0.0
----- ----- ----- -----
EQUITY VALUE $48.4 $49.3 $50.3 $51.4
IMPLIED PERPETUITY GROWTH 5.0% 5.5% 6.0% 6.5%
% VALUE FROM TERMINAL MULT. 54.6% 55.4% 56.3% 57.2%
24.0% PV of Free Cash Flow $19.6 $19.6 $19.6 $19.6
PV of Terminal Multiple 20.1 20.7 21.4 22.1
----- ----- ----- -----
Enterprise Value $39.7 $40.3 $41.0 $41.7
Less: Net Debt 0.0 0.0 0.0 0.0
----- ----- ----- -----
EQUITY VALUE $39.7 $40.3 $41.0 $41.7
IMPLIED PERPETUITY GROWTH 5.0% 5.5% 6.0% 6.5%
% VALUE FROM TERMINAL MULT. 50.6% 51.4% 52.2% 53.0%
--------------------------------------------------
SELECTED EQUITY VALUE RANGE $40 - $65
--------------------------------------------------
- -------------------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
-21-
MYCOGEN CORPORATION VALUATION: SUMMARY OF BUSINESS UNITS
- --------------------------------------------------------------------------------
ELEMENTS OF PROJECTED BUSINESS VALUATION
- ---------------------------------------------------------------------------------------------------------
BUSINESS CROP TRAIT GEOGRAPHICAL REGION
- -------- ---- ----- -------------------
N. AMERICA ARGENTINA BRAZIL OTHER
- ---------------------------------------------------------------------------------------------------------
Biopesticides -- -- X
SoilServ -- -- X
Conventional Seed
Corn -- X X X
Soybeans -- X
Sunflower -- X
Sorghum -- X
Alfalfa -- X
Early Traits (Herbicide Resistance)
Corn RR/LL X X X
Sunflower RR/LL X
Soybean LL X
Sorghum RR/LL X
Early Traits (Insect Resistance)
Corn Bt176 X
Corn Spodoptera X
Corn Elasmopalpost X
Corn Diabrotica X
Corn Helicoverpa X
Corn Armyworm
Corn ECB/Glufosinate X X
Corn CRW/Glufosinate X X
Sunflower Looper X
Sunflower Head Moth X
Sunflower Seed Weevil X
Soybean Cyst X X
- ---------------------------------------------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-22-
MYCOGEN CORPORATION VALUATION: SUMMARY OF BUSINESS UNITS
- --------------------------------------------------------------------------------
ELEMENTS OF PROJECTED BUSINESS VALUATION (CONT'D)
- ---------------------------------------------------------------------------------------------------------
BUSINESS CROP TRAIT GEOGRAPHICAL REGION
- -------- ---- ----- -------------------
N. AMERICA ARGENTINA BRAZIL OTHER
- ---------------------------------------------------------------------------------------------------------
Sorghum Midge
Greenbug Aphid
Alfalfa Weevil
Lepidoptera
Output Corn High Oil X X X
High Oil/Evt. 176 X
Hi Oleic X X X
Low Phytate X X X
Forage Protein X X X
Green Gene X X X
Soybean High Nutrition X X
Sunflower High Oleic X
High Palmitic X
Quality Protein X X
Sorghum Nutritional X
Disease Resistance
Corn Mold/Mycototoxin X X
Sunflower Sclerotinia X X
Verticilian X
- ---------------------------------------------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-23-
MYCOGEN CORPORATION VALUATION: SUMMARY OF BUSINESS UNITS
- --------------------------------------------------------------------------------
ELEMENTS OF PROJECTED BUSINESS VALUATION (CONT'D)
- ---------------------------------------------------------------------------------------------------------
BUSINESS CROP TRAIT GEOGRAPHICAL REGION
- -------- ---- ----- -------------------
N. AMERICA ARGENTINA BRAZIL OTHER
- ---------------------------------------------------------------------------------------------------------
JV/Partner Royalties
VMO Conventional Europe
Early Traits Europe
Output Traits Europe
Cotton Conventional X X
Bud/Bollworm X X Australia
Boll Weevil X X and
Lygus X Greece
Oilseed/Humko -- X X
Oilseed/DAS -- X
Rice Stem Borer Japan
Plant Hopper Japan
Turf White Grub X
Army/Cutworm X
Webworm X
- ---------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Products Valued (By Region) 38 19 14 7
Total Product Lines Valued 78
-------------------------------------------------------------------------------------
--------------------------------------------------
Conventional and Other 14
Early Traits 33
Output Traits 25
Disease Resistance 5
--------------------------------------------------
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-24-
MYCOGEN CORPORATION
RESULTS OF DISCOUNTED CASH
FLOW VALUATION
WASSERSTEIN PERALLA & CO.
- -------------------------------------------------------------------------------
-25-
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
- -------------------------------------------------------------------------------
SUMMARY OF VALUATION
- ------------------------------------------------------------------------------------------------------------------------------------
Discount Growth Rate Valuations Geographic Sub- Volume
Business Crop Region Rate /EBIT Multiple Lo Hi Average Total Totals Share
- ------------------------------------------------------------------------------------------------------------------------------------
BIO-PESTICIDES - - 11.0%-14.0% 6 - 10 $ 3 $ 4 $ 4 $ 4 $ 4 $0.09-$0.12
SOILSERV - - 11.0%-14.0% 6 - 10 $ 28 $ 40 $ 34 $ 34 $ 34 $0.72-$1.02
CONVEN. SEED Corn N. America 12.0%-14.0% 8 - 12 $ 94 $ 210 $ 152
Agentina 12.0%-14.0% 8 - 12 $ 37 $ 34 $ 47
Brazil 12.0%-14.0% 8 - 12 $ 101 $ 175 $ 138
Soybeans N. America 12.0%-14.0% 8 - 12 $ (10) $ 18 $ 4
Brazil 12.0%-14.0% 8 - 12 $ 0 $ 0 $ 0
Sorghum N. America 12.0%-14.0% 8 - 12 $ 9 $ 15 $ 12
Alfalfa N. America 12.0%-14.0% 8 - 12 $ 3 $ 9 $ 6
Sunflower N. America 12.0%-14.0% 8 - 12 $(4) $(4) $(4)
Argentina 12.0%-14.0% 8 - 12 $ 14 $ 22 $ 18
All N. America 12.0%-14.0% 8 - 12 $ 97 $ 254 $ 176 $2.51-$6.54
Argentina 12.0%-14.0% 8 - 12 $ 49 $ 79 $ 64 $1.28-$2.02
Brazil 12.0%-14.0% 8 - 12 $ 101 $ 175 $ 138 $2.62-$4.30
TOTAL CONVENTIONAL SEED $ 378
EARLY/INPUT TRAITS
Corn N. America 20.0%-24.0% 5.0% - 6.5% $ 72 - $ 126 $ 99
Argentina 20.0%-24.0% 5.0% - 6.5% $ 1 - $ 5 $ 3
Brazil 20.0%-24.0% 5.0% - 6.5% $ 29 - $ 53 $ 41
Soybeans N. America 20.0%-24.0% 5.0% - 6.5% $ 40 - $ 65 $ 52
Brazil 20.0%-24.0% 5.0% - 6.5% $(0)- $ 1 $ 0
Sunflower N. America 20.0%-24.0% 5.0% - 6.5% $(1)- $(1) $(1)
Argentina 20.0%-24.0% 5.0% - 6.5% $(0)- $ 2 $ 1
All N. America 20.0%-24.0% 5.0% - 6.5% $ 110 - $ 190 $ 150 $2.85-$4.82
Argentina 20.0%-24.0% 5.0% - 6.5% $ 1 - $ 7 $ 4 $0.02-$0.18
Brazil 20.0%-24.0% 5.0% - 6.5% $ 29 - $ 54 $ 41 $0.74-$1.39
TOTAL EARLY TRAITS $ 195
OUTPUT TRAITS
Corn N. America 25.0%-30.0% 5.0% - 6.5% $ 7 - $ 17 $ 12
Argentina 25.0%-30.0% 5.0% - 6.5% $(2)- $(2) $(2)
Brazil 25.0%-30.0% 5.0% - 6.5% $ 5 - $ 11 $ 8
Soybean N. America 25.0%-30.0% 5.0% - 6.5% $ 144 - $ 266 $ 205
Brazil 25.0%-30.0% 5.0% - 6.5% $ 7 - $ 14 $ 11
Sunflower N. America 25.0%-30.0% 5.0% - 6.5% $ 4 - $ 8 $ 6
Argentina 25.0%-30.0% 5.0% - 6.5% $ 13 - $ 23 $ 18
All N. America 25.0%-30.0% 5.0% - 6.5% $ 156 - $ 291 $ 223 $4.03-$7.47
Argentina 25.0%-30.0% 5.0% - 6.5% $ 11 - $ 21 $ 16 $0.28-$0.55
Brazil 25.0%-30.0% 5.0% - 6.5% $ 14 - $ 27 $ 20 $0.35-$0.70
TOTAL OUTPUT TRAITS $ 260
DISEASE RESISTANCE
N. America 31.0%-50.0% 8.0% - 10.0% $(2)- $ 0 $(1) $(1) $0.05-$0.00
Argentina 31.0%-50.0% 8.0% - 10.0% $(0)- $ 2 $ 1 $ 1 $0.00-$0.04
Brazil 31.0%-50.0% 8.0% - 10.0% $(0)- $(0) $(0) $(0) $0.01-$0.01
TOTAL DISEASE RESISTANCE (CURRENT) $(1)
All Other Crops 45.0%-50.0% 8.0% - 10.0% $ 119 - $ 154 $ 136 $ 136 $3.07-$3.96
Rice (Japan Tobacoo) 31.0%-50.0% 5.0% - 10.0% $(2)- $ 2 $(0) $(0) $0.06-$0.04
TOTAL DISEASE RESISTANCE (OTHER) $ 136
JV/ROYALTIES
VMO Conventional Seed 12.0%-14.0% % - 10 $ 7 - $ 10 $ 9 $0.18-$0.27
Early/Input Traits 20.0%-24.0% 5.0% - 6.5 % $(1)- $(2) $(2) $0.04-$0.04
Output Traits 25.0%-30.0% 5.0% - 6.5 % $ 2 - $ 4 $ 3 $0.06-$0.11
Disease Res. 31.0%-30.0% 5.0% - 10.0% $(0)- $ 0 $ 0 $0.00-$0.01
TOTAL VMO $ 8 $ 14 $ 11 $ 11
JG BOSWELL Cotton 12.0%-14.0% % - 12 $ 59 - $ 86 $ 73 $ 73 $ 73 $1.53-$2.22
HUMKO Oilseed N. America 12.0%-14.0% % - 10 $ 0 - $ 0 $ 0 $ 0 $0.00-$0.00
Argentina 12.0%-14.0% % - 10 $ 2 - $ 3 $ 2 $ 2 $0.06-$0.07
TOTAL OTHER $ 0 - $ 0 $ 3
DAS CANADA Canola 20.0%-24.0% % - 12 $ 13 - $ 21 $ 17 $ 17 $ 17 $0.33-$0.54
PHB BT ROYALTIES 20.0%-24.0% $ 35 - $ 38 $ 36 $ 36 $ 36 $0.89-$0.97
OTHER PARTNER ROYALTIES 20.0%-24.0% 1.0% - 2.5% $ 14 - $ 21 $ 17 $ 17 $ 17 $0.35-$0.54
Other Pests/Crops 31.0%-50.0% 5.0% - 6.5% $ 20 - $ 104 $ 62 $ 62 $ 62 $0.53-$2.67
MISCELLANEOUS(1)
NOL-Current (est) $ 80 - $ 80 $ 80 $ 80 $2.07-$2.06
NOL-Projects (est) $ 31 - $ 31 $ 31 $ 31 $0.79-$0.78
Monsanto Settlement (80%-100% Probability) $ 82 - $ 103 $ 92 $ 92 $2.12-$2.64
35% in Vermont (at cost) $ 9 - $ 9 $ 9 $ 9 $0.24-$0.24
Bt Blocking (50% probability) 20.0%-14.0% $ 111 - $ 131 $ 121 $ 121 $2.83-$3.36
Litigation Expense (Net of Interest) 12.0%-14.0% $(37)- $(36) $(36) $(36)
Net Debt $(75)- $(75) $(75) $(75) $1.94-$1.93
$ 222
------ ------ ------ ------ ------
TOTAL $1,068 $1,823 $1,440 $1,448 $1,448
Shares Outstand (MM) 36.26
Options Outstand (MM) 3.59
Final Outstanding (Treasury Method, MM) 38.73 38.93 38.69 38.69
Value Share $27.57 $46.84 $37.22 $37.42
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Additional opportunities remaining to be quantified include biotech
reagent and protocol licensed royalties and oral immunity.
Note: Initial value excludes contribution from revenue synergies, cost
savings, and other economies of scale from consolidation with DAS. Value per
share calculted based on outstanding common shares, includes 3.593 million
outstanding options with an average exercise price of $12.03
Wasserstein Peralla & Co.
- --------------------------------------------------------------------------------
-26-
MYCOGEN VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
- -------------------------------------------------------------------------------
VALUATION OF BUSINESSES (AVERAGE OF PROJECTED RANGE)
[GRAPH]
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-27-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD
- -------------------------------------------------------------------------------
PROBABILITY-WEIGHTED VALUATION METHODOLOGY
- - AN ALTERNATIVE METHOD OF VALUATION, RATHER THAN VARYING THE DISCOUNT RATES
FOR VARIOUS PROJECTS, USES PROBABILISTIC WEIGHTING OF EVENTS WITH A
CONSTANT RISK-ADJUSTED COST OF CAPITAL
- - INSTEAD OF USING VARIABLE DISCOUNT RATES FOR BUSINESSES TO REFLECT THE
VARYING ASSOCIATED RISK, THE RISK OF A GIVEN BUSINESS IS MADE EXPLICIT
THROUGH DEFINED GO/NO GO DECISION STAGES
- The development pipeline for new products is defined in terms of
discrete stages with associated cost requirements. Each stage is also
examined in terms of success rate of various categories of projects
through the relevant go/no go decision pointS
- Scientific expert opinion is collectively applied to estimate the
projected probability for successfully developing new projects. Early
stages receive a low probability due to scientific risks, and later
stages receive a higher probability due to commercialization risks
- - THE RESULTING PRODUCT ATTRITION AND SPENDING PROFILES ARE APPLIED TO
ESTIMATE THE PROBABILITY THAT A GIVEN PROJECT WILL PASS THROUGH SUCCESSIVE
STAGES OF THE DEVELOPMENT PIPELINE UNTIL COMMERCIALIZATION. THESE
PROBABILITY-WEIGHTED EXPENSE AND REVENUE STREAMS ARE THEN USED TO ESTIMATE
THE FREE CASH FLOW AND ASSOCIATED VALUATION
- - WP&CO. HAS LOWERED MANAGEMENT PROBABILITY ESTIMATES TO REFLECT EXECUTION
AND COMMERCIALIZATION RISK IN LIGHT OF SIZE AND FINANCIAL RESOURCES OF
COMPETITORS
MANAGEMENT WP&CO. MODIFIED
---------- ---------------
ESTIMATES ESTIMATES
--------- ---------
Early Traits 100% 90%
Output Traits 100% 81%
Disease Resistance 100% 72%
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-28-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD
- -------------------------------------------------------------------------------
PRODUCT ATTRITION PROFILE FOR PROBABILITY-WEIGHTED VALUATION METHOD
------------ ------------- ------------------
EARLY TRAITS OUTPUT TRAITS DISEASE RESISTANCE
------------ ------------- ------------------
[GRAPH] [GRAPH] [GRAPH]
COST ($/MM) T-5 T-4 T-3 T-2 T-1 T=0
------- ------- ------- ------- -------- (LAUNCH)
ACTIVITIES
Gene characterization $2.00 $0.5 $0.0
Expression/Screening $1.0 $0.5
Optimization $0.5 $0.1
Event Breeding $0.6 $0.6
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-29-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
- --------------------------------------------------------------------------------
SUMMARY OF VALUATION
- ----------------------------------------------------------------------------------------------------------------------------
BUSINESS CROP REGION DISCOUNT GROWTH RATE VALUATION GEOGRAPHIC SUB-
RATE /EBIT MULTIPLE LO HI AVERAGE TOTAL TOTALS
- ----------------------------------------------------------------------------------------------------------------------------
BIOPESTICIDES - - 10.0% - 14.0% 6 - 10 $3 - $5 $4 $4 $4
SOILSERV - - 10.0% - 14.0% 6 - 10 $27 - $41 $34 $34 $34
CONVEN. SEED
Corn N. America 11.0% - 14.0% 8 - 10 $95 - $185 $140
Argentina 11.0% - 14.0% 8 - 10 $37 - $55 $46
Brazil 11.0% - 14.0% 8 - 10 $112 - $178 $145
Soybeans N. America 11.0% - 14.0% 8 - 10 ($11)- $9 ($1)
Brazil 11.0% - 14.0% 8 - 10 $0 - $0 $0
Sorghum N. America 11.0% - 14.0% 8 - 10 $9 - $14 $12
Alfalfa N. America 11.0% - 14.0% 8 - 10 $3 - $8 $5
Sunflower N. America 11.0% - 14.0% 8 - 10 ($4)- ($4) ($4)
Argentina 11.0% - 14.0% 8 - 10 $15 - $22 $18
All N. America 11.0% - 14.0% 8 - 10 $101 - $221 $161
Argentina 11.0% - 14.0% 8 - 10 $54 - $81 $68
Brazil 11.0% - 14.0% 8 - 10 $112 - $178 $145
Total Conventional Seed $374
EARLY/INPUT TRAITS
Corn N. America 11.0% - 14.0% 5.0% - 6.5% $63 - $150 $106
Argentina 11.0% - 14.0% 5.0% - 6.5% $1 - $6 $4
Brazil 11.0% - 14.0% 5.0% - 6.5% $22 - $56 $39
Soybeans N. America 11.0% - 14.0% 5.0% - 6.5% $72 - $154 $113
Brazil 11.0% - 14.0% 5.0% - 6.5% ($0)- $1 $0
Sunflower N. America 11.0% - 14.0% 5.0% - 6.5% ($2)- $0 ($1)
Argentina 11.0% - 14.0% 5.0% - 6.5% ($0)- $4 $2
All N. America 11.0% - 14.0% 5.0% - 6.5% $134 - $305 $219
Argentina 11.0% - 14.0% 5.0% - 6.5% $1 - $10 $6
Brazil 11.0% - 14.0% 5.0% - 6.5% $22 - $57 $40
Total Early Traits $264
OUTPUT TRAITS
Corn N. America 11.0% - 14.0% 5.0% - 6.5% $6 - $23 $14
Argentina 11.0% - 14.0% 5.0% - 6.5% ($1)- ($0) ($1)
Brazil 11.0% - 14.0% 5.0% - 6.5% $2 - $9 $5
Soybeans N. America 11.0% - 14.0% 5.0% - 6.5% $110 - $276 $193
Brazil 11.0% - 14.0% 5.0% - 6.5% $6 - $16 $11
Sunflower N. America 11.0% - 14.0% 5.0% - 6.5% $3 - $7 $5
Argentina 11.0% - 14.0% 5.0% - 6.5% $8 - $18 $13
All N. America 11.0% - 14.0% 5.0% - 6.5% $120 - $306 $213
Argentina 11.0% - 14.0% 5.0% - 6.5% $6 - $18 $12
Brazil 11.0% - 14.0% 5.0% - 6.5% $10 - $27 $18
Total Output Traits $243
DISEASE RESISTANCE
N. America 11.0% - 14.0% 8.0% - 10.0% ($2)- $11 $4 $4
Argentina 11.0% - 14.0% 8.0% - 10.0% $1 - $10 $6 $6
Brazil 11.0% - 14.0% 8.0% - 10.0% ($1)- ($1) ($1) $(1)
Total Disease Resistance (Current) $9
Disease Resistance - All Other Crops 11.0% - 14.0% 5.0% - 6.5% $86 - $176 $131 $131
- Rice (Japan Tobacco) 11.0% - 14.0% 5.0% - 6.5% $3 - $14 $8 $8
Total Disease Resistance (Other) $139
JV/ROYALTIES
VMO Conventional Seed 11.0% - 14.0% 6 - 12 $7 - $13 $10
Early/Input Traits 11.0% - 14.0% 5.0% - 6.5% ($1) - ($1) ($1)
Output Traits 11.0% - 14.0% 5.0% - 6.5% $2 - $4 $3
Disease-Res. 11.0% - 14.0% 8.0% - 10.0% $0 - $4 $2
TOTAL VMO $8 $21 $14 $14
JG Boswell Cotton 11.0% - 14.0% 6 - 12 $51 - $93 $72 $72 $72
Humko Oilseed N. America 11.0% - 14.0% 8 - 10 $0 - $0 $0 $0
Argentina 11.0% - 14.0% 8 - 10 $2 - $3 $2 $2
TOTAL OILSEED $0 - $0 $3
DAS Canada Canola 10.0% - 14.0% 4 - 10 $19 - $40 $29 $29 $29
PHB B1 Royalties 10.0% - 14.0% $43 - $48 $46 $46 $46
Other Partner Royalties 11.0% - 14.0% 5.0% - 6.5% $10 - $22 $16 $16 $16
Other Pests / Crops 11.0% - 14.0% 5.0% - 6.5% $137 - $334 $236 $236 $236
MISCELLANEOUS(1)
NOL-Current (est) $80 - $80 $80 $80
NOL-Projected (est) $28 - $28 $28 $28
Monsanto Settlement (80-100% Probability) $82 - $103 $92 $92
35% in Verneuil (at cost) $9 - $9 $9 $9
Bt Blocking (50% probability) 11.0% - 14.0% $175 - $203 $189 $189
Litigation Expense (Net of Interest) 11.0% - 14.0% ($37) ($35) ($36) ($36)
Net Debt ($75) ($75) ($75) ($75) ($75)
$363
------- ------- ------- ------- -------
TOTAL $1,110 $2,125 $1,748 $1,763 $1,763
Shares Outstand. (MM) 36.26
Options Outstand. (MM) 3.59
FINAL OUTSTANDING (TREASURY METHOD, MM) 38.35 39.05 38.89 38.90
Value/Share $28.93 $54.41 $44.96 $45.33
- ----------------------------------------------------------------------------------------------------------------------------
(1) Additional opportunities remaining to be quantified include biotech
reagent and protocol licensed royalties and oral immunity.
Note: Initial value excludes contribution from revenue synergies, cost savings,
and other economies of scale from consolidation with DAS.
Value per share calculated based on outstanding common shares, includes
3.593 million outstanding options with an average exercise price of $12.03
WASSERSTEIN PERELLA & CO.
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-30-
MYCOGEN CORPORATION
- ------------------------------------------------------------------------------
------------------------------------------
COMPARABLE ANALYSIS
------------------------------------------
WASSERSTEIN PERELLA & CO.
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- 31 -
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- ------------------------------------------------------------------------------
COMPARABLE SEED COMPANIES
DIAMOND MYCOGEN'S VALUE IS A COMBINATION OF ITS CONVENTIONAL SEED BUSINESS
AND THE VALUE DERIVED FROM ACTIVITIES IN THE AGROBIOTECH AREA
DIAMOND MYCOGEN'S CONVENTIONAL SEED BUSINESS IS A VALUABLE ASSET BUT HAS NO
CLEAR SIMILARLY SIZED AND SCOPED COMPARABLES
- Within the past twelve months nearly every public U.S. seed
company has either been acquired or received a strategic
minority investment. As a result, these stocks trade based on
their pending acquisition or in the case of Pioneer and
AgriBiotech on speculation of some future transaction
- Publicly traded seed companies are a scarce asset. Private seed
companies appear to be an alternative to Mycogen, but most are
too small, with the larger companies operating as cooperatives
and limited in their ability to offer control to a third party
- Market share remains a key determinant of value, both because
of the critical effect of size in determining profitability and
the ability to drive adoption of new hybrids in the market.
However, a share of the larger market for major row crops, e.g.
corn and soybean, is more highly valued than similar shares in
other small crop segments
- While Mycogen's seed business is smaller than both Pioneer and
DeKalb Genetics, these are the most comparable businesses in
their leadership roles in seed distribution, germplasm quality
and commitment to R&D
DIAMOND OFFSETTING MYCOGEN'S SIZE RELATIVE TO SEED COMPETITORS IS ITS
CLEARLY SUPERIOR POSITION RELATIVE TO MOST COMPARABLE AGROBIOTECH
COMPANIES
- Mycogen has a technology and product development portfolio that
is comparable to larger competitors. Mycogen dominates the
attractive Bt market. Mycogen holds more than four times the
number of Bt patents held by its closest competitor
- Mycogen's network of alliances and licensing rights provide
ready access to a critical mass of biotech tools and
intellectual property. In addition, Mycogen has gained
exclusive access to certain highly attractive new growth
platforms such as Ahlquist technology for insect and disease
resistance and oral immunity through transgenic plants
DIAMOND MYCOGEN'S BIOTECH CAPABILITIES ARE UNIQUE. THERE IS NO COMPARABLE
PUBLIC COMPANY OF ANY SIZE. HOWEVER, A GOOD HISTORICAL COMPARABLE
IS PROVIDED BY PGS. THIS BUSINESS, WITH NO SALES, LARGE LOSSES AND
AN IP POSITION CONSIDERABLY WEAKER THAN MYCOGEN'S, WAS ACQUIRED BY
AGREVO FOR $733 MILLION
WASSERSTEIN PERELLA & CO.
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- 32 -
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- ------------------------------------------------------------------------------
COMPARABLE COMPANY ACQUISITIONS
DIAMOND THE RECENT ACQUISITION OF CARGILL'S INTERNATIONAL SEED BUSINESS
CONTRADICTS THE NOTION THAT LOSS-MAKING MYCOGEN DIFFERS FROM OTHER
COMPARABLE ACQUISITIONS SINCE OTHER COMPANIES ARE ALL PROFITABLE.
CARGILL'S LOSS-MAKING SEED BUSINESS (-$-20 MILLION IN 1997) WAS
RECENTLY ACQUIRED BY MONSANTO FOR $1.4 BILLION
DIAMOND THERE ARE NO COMPARABLE ACQUISITIONS OF SEED COMPANIES WITH A
SIMILAR MARKET SHARE AND PRESENCE IN CROP SEGMENTS TO MYCOGEN.
HOWEVER, THE ACQUISITION OF MINORITY STAKES IN PIONEER AND THE
ACQUISITION OF DELTA AND PINE LAND PROVIDE SOME SIMILARITY IN
TERMS OF CROP PRESENCE AND MARKET SHARE, RESPECTIVELY
DIAMOND DOW'S 68.8% OWNERSHIP OF MYCOGEN WAS BOUGHT AT AN AGGREGATE
ACQUISITION PRICE OF $16.78 PER SHARE. ALTHOUGH THE INITIAL
PURCHASE OF 4.45 MILLION SHARES FROM LUBRIZOL TOOK PLACE AT A 25%
PREMIUM TO THE MARKET, THE SUBSEQUENT SHARES PURCHASED BY DOW HAVE
BEEN ACQUIRED AT A MINIMAL PREMIUM (LESS THAN 5% IN AGGREGATE)
DIAMOND COMPARABLE "SQUEEZE-OUT" TRANSACTIONS IN THE BIOTECH INDUSTRY HAVE
REQUIRED PREMIUM TO THE CURRENT SHAREHOLDERS OF OVER 50%.
ACQUIRING THE REMAINING SHARES OF MYCOGEN IN THE RANGE OF THE
CURRENT VALUATION OR AT A SIMILAR PREMIUM TO THE MARKET WILL STILL
PROVIDE DOW WITH THE COMPLETE ACQUISITION OF MYCOGEN AT AN
AGGREGATE PURCHASE PRICE AT OR BELOW CURRENT TRADING VALUES
WASSERSTEIN PERELLA & CO.
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- 33 -
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- ------------------------------------------------------------------------------
PREMIUM ANALYSIS - MONSANTO/DEKALB GENETICS
Premium to Prior Price
----------------------------------------------------------------------
Price/
Annc. Date Shares(3) % Total Cumm % Share(3) 1-Day 1-Week 4-Weeks 8-Weeks
- ---------- -------- ------- ------ -------- ------ ------ ------- -------
2/11/96 0.49 1.4% 1.4% $ 10.83 $11.42 (5%) $10.96 (1%) $ 7.83 38% $ 7.58 43%
2/11/96 2.27 6.6% 8.0% $ 10.83 $11.42 (5%) $10.96 (1%) $ 7.83 38% $ 7.58 43%
2/11/96 10.34 29.9% 37.8% $ 11.83 $11.42 4% $10.96 8% $ 7.83 51% $ 7.58 56%
NA 0.71 2.1% 39.9% $ 38.26 (4)
5/9/98 20.81 60.1% 100.0% $100.00 $74.13 35% $69.50 44% $70.81 41% $70.19 42%
------
TOTAL 34.61
Weighted Avg. Latest Acq.
------------- -----------
PURCHASE PRICE PER SHARE $ 65.29 $ 100.00
Shares Outstanding (2) 36.3 36.3
-------- --------
Aggregate Purchase Value $2,371.9 $3,632.7
Net Debt (2/98) 110.0 110.0
-------- --------
ADJUSTED AGGREGATE PURCHASE VALUE $2,481.9 $3,742.7
LTM Sales (2/98) $ 468.6 $ 468.6
ADJUSTED AGGREGATE PURCHASE VALUE/SALES 5.30x 7.99x
- -------------------
(1) Estimated based on analyst estimates and news articles
(2) Represents common equivalent shares based on respective prices
(3) Split adjusted
(4) Estimated average share price. Specific dates were not available
WASSERSTEIN PERELLA & CO.
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- 34 -
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
PREMIUM ANALYSIS - DOW/MYCOGEN
TOTAL %
--------------- PREMIUM TO PRIOR PRICE
PRE POST ----------------------------------------------------------------
ANNC. DATE SHARES TRANS. TRANS. PRICE/SHARE 1-DAY 1-WEEK 4-WEEKS 8-WEEKS
- ---------- ------ ------ ------ ----------- ------ ------ ------- -------
1/15/96 4.45 18.1% 12.3% $16.27 $16.00 2% $14.25 14% $13.88 17% $13.00 25%
1/15/96 9.50 38.6% 26.3% $13.28 $16.00 (17%) $14.25 (7%) $13.88 (4%) $13.00 2%
1996 0.85 3.4% 2.3% $17.21(1)
12/3/96 1.00 4.1% 2.8% $16.75 $16.75 0% $16.75 0% $15.75 6% $14.38 17%
1997 2.29 9.3% 6.3% $23.20(2)
1/9/98 0.48 2.0% 1.3% $19.46 $19.25 1% $19.13 2% $19.75 (1%) $19.94 (2%)
1/16/98 3.76 15.3% 10.4% $19.94 $18.75 6% $19.13 4% $19.13 4% $19.88 0%
1998 0.30 1.2% 0.8% $19.48
3/13/98 2.00 8.1% 5.5% $20.06 $18.31 10% $18.75 7% $20.63 (3%) $21.75 (8%)
------ ------ ------ ------
Subtotal 24.63 100.0% 68.2% $16.78
Final 11.48 31.8%
------ ------
Total 36.11 100.0%
ASSUMED FINAL PURCHASE PRICE/SHARE $20.50 $25.00 $30.00 $35.00 $40.00
Cum. Wtd. Avg. Price $17.96 $19.39 $20.98 $22.57 $24.16
Shares Outstanding(3) 37.9 38.4 38.8 39.0 39.2
------ ------ ------ ------ ------
Aggregate Purchase Value $681.6 $744.9 $813.5 $880.8 $947.4
Net Debt (2/98) 13.7 13.7 13.7 13.7 13.7
------ ------ ------ ------ ------
ADJUSTED AGGREGATE PURCHASE VALUE $695.2 $758.6 $827.1 $894.5 $961.1
LTM Sales (2/98) $214.0 $214.0 $214.0 $214.0 $214.0
ADJUSTED AGGREGATE PURCHASE VALUE/SALES 3.25x 3.55x 3.87x 4.18x 4.49x
- ----------------------------
(1) Weighted average price of various open market purchases made during 1996
(2) Weighted average price of various open market purchases made during 1997
(3) Represents common equivalent shares based on respective purchase prices
for final share blocks
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-35-
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
PREMIUM ANALYSIS FOR BIOTECH ACQUISITIONS BY MAJOR SHAREHOLDERS(1)
SELLER CLOSING PRICE/
PRE-ANN. ACQUISITION PREMIUM
ANN. DEAL PER SHARE ----------------------------
ANN. VALUE ACQ. % BEING 1-DAY 30-DAY 60-DAY
ACQUIROR SELLER DATE ($MM) PRICE ACQUIRED PREM. PREM. PREM.
- -------- ------ ---- ------- ------- -------- ------ ------ ------
Monsanto Co. Calgene Inc. (Biotech) 1/28/97 242.6 $8.00 43.7% 45.5% 60.0% 45.5%
Novartis AG SyStemix Inc. (Biotech) 5/27/96 119.4 $19.50 26.8% 77.3% 59.2% 48.6%
Monsanto Co. DeKalb Genetics 5/9/98 3,426.2 $100.00 60.11% 34.91% 41.22% 42.47%
- -------------------------------------------------------------------------------
Mean 43.5% 52.5% 53.5% 45.5%
Median 43.7% 45.5% 59.2% 45.5%
Maximum 60.1% 77.3% 60.0% 48.6%
Minimum 26.8% 34.9% 41.2% 42.5%
Mycogen Corp. Data $23.75 $23.25 $23.00
Implied Share Price Based on Median for Biotech Transactions $34.55 $37.01 $33.45
Implied Share Price Based on Median for Biotech Transactions $36.23 $35.68 $33.47
- -------------------------------------------------------------------------------
- ----------------------------
(1) Source: Securities Data Company
Note: Unless noted, days referred to are calendar days.
WASSERSTEIN PERELLA & CO.
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-36-
MYCOGEN CORPORATION
- --------------------------------------------------------------------------------
-------------------------------------
CONCLUSIONS
-------------------------------------
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-37-
MYCOGEN CORPORATION CONCLUSIONS
- --------------------------------------------------------------------------------
SUMMARY OF VALUATION RESULTS
LOW MEAN HIGH
--- ---- ----
DISCOUNTED CASH FLOW
Variable Discount Rate $27.57 $46.84
Probability-Weighted Method $28.93 $54.41
COMPARABLE TRADING COMPANIES(1)
Premium of 10%, Implied Multiple: 5.5x $31.06
Premium of 30%, Implied Multiple: 5.8x $32.92
Premium of 50%, Implied Multiple: 6.2x $34.78
COMPARABLE ACQUISITIONS(2)
Range with and without DKB(3) $33.24 $38.85
BIOTECH SQUEEZE OUT
(Comparable Range of Premiums)
Based on Current Price $32.04 $42.43
Based on Price 60 Days Prior $32.77 $34.17
(1) Comparable Companies: Pioneer, DeKalb, Delta and Pine Land, and Agribiotech.
Acquisition premiums only applied to sales multiples for Pioneer and
Agribiotech.
(2) Comparable acquisitions included: DeKalb(60%)/Monsanto; Calgene
(49.9%/Monsanto); Pioneer Hi-Bred(20%)/DuPont and Delta and Pine Land/
Monsanto.
(3) Delta and Pine Land acquisition not directly comparable due to dominant DPL
position in cotton market.
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-38-
MYCOGEN CONCLUSIONS
- --------------------------------------------------------------------------------
GRAPHICAL SUMMARY OF VALUATION RESULTS
METHOD
- ------
- - DISCOUNTED CASH FLOW
- Variable Discount Rate [LINE GRAPH]
- Probability-Weighted
- - COMPARABLE TRADING COMPANIES
(Premiums only apply to PHB and AgroBiotech)
- Premium 10% [LINE GRAPH]
- Premium 30%
- Premium 50%
- - COMPARABLE ACQUISITIONS
- DKB, PHB, Calgen (49,9%) [LINE GRAPH]
(with and without DPL)
- - BIOTECH SQUEEZE OUT
(Range of Biotech Premiums) [LINE GRAPH]
- Based on Current Price
- Based on Price 60 Days Prior
WASSERSTEIN PERELLA & CO.
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-39-
MYCOGEN CONCLUSIONS
- --------------------------------------------------------------------------------
IMPLIED AGGREGATE DOW PURCHASE PRICE FOR MYCOGEN
VALUATION APPROACH
- ------------------
- - VARIABLE DISCOUNT RATE
- - PROBABILITY-WEIGHTED
- - COMPARABLE TRADING/ACQUISITIONS
- - BIOTECH SQUEEZE OUT
IMPLIED AGGREGATE PURCHASE
- --------------------------
(REMAINING BLOCK PURCHASED AT ABOVE VALUATION)
- - VARIABLE DISCOUNT RATE
- - PROBABILITY-WEIGHTED
- - COMPARABLE TRADING/ACQUISITIONS
- - BIOTECH SQUEEZE OUT
MYCO [$23.75]
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-40-
MYCOGEN CORPORATION
- --------------------------------------------------------------------------------
------------------------------
APPENDIX
A. SUMMARY FINANCIALS
B. COMPARABLE ANALYSES
------------------------------
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-41-
MYCOGEN CORPORATION
- --------------------------------------------------------------------------------
------------------------------
SUMMARY FINANCIALS
------------------------------
WASSERSTEIN PERELLA & CO.
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-42-
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
- --------------------------------------------------------------------------------
CORPORATE INCOME STATEMENT PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------ ------ ------ ------ ------ ------ ------ -------- -------- --------
Revenues $256.5 $298.5 $355.8 $418.5 $491.3 $575.7 $702.1 $1,057.6 $1,498.5 $2,026.7
SoilServ $ 34.2 $ 33.4 $ 33.4 $ 33.4 $ 33.4 $ 33.4 $ 33.4 $ 33.4 $ 33.4 $ 33.4
Biopesticides $ 8.3 $ 7.8 $ 7.8 $ 7.8 $ 7.8 $ 7.8 $ 7.8 $ 7.8 $ 7.8 $ 7.8
Seeds $186.4 $221.0 $273.3 $330.1 $400.6 $483.9 $605.0 $ 957.2 $1,393.6 $1,916.3
VMO $ 5.9 $ 7.4 $ 8.1 $ 9.1 $ 10.2 $ 11.5 $ 17.0 $ 20.5 $ 25.2 $ 30.7
Oilseed $ 21.7 $ 28.8 $ 33.2 $ 38.1 $ 39.3 $ 39.1 $ 38.9 $ 38.7 $ 38.5 $ 38.5
COGS $147.6 $175.3 $200.1 $226.8 $252.6 $278.7 $312.7 $ 361.5 $ 408.9 $ 464.1
SoilServ $ 22.0 $ 22.3 $ 22.3 $ 22.3 $ 22.3 $ 22.3 $ 22.3 $ 22.3 $ 22.3 $ 22.3
Biopesticides $ 4.5 $ 4.9 $ 4.9 $ 4.9 $ 4.9 $ 4.9 $ 4.9 $ 4.9 $ 4.9 $ 4.9
Seeds $ 96.3 $115.8 $135.9 $157.3 $180.9 $206.1 $239.3 $ 287.1 $ 333.3 $ 387.2
VMO $ 3.9 $ 4.9 $ 5.4 $ 6.1 $ 6.8 $ 7.6 $ 8.5 $ 9.6 $ 10.7 $ 12.0
Oilseed $ 20.9 $ 27.5 $ 31.7 $ 36.3 $ 37.8 $ 37.8 $ 37.8 $ 37.8 $ 37.8 $ 37.8
GROSS PROFIT $109.0 $123.2 $155.7 $191.8 $238.7 $297.0 $389.4 $ 696.1 $1,089.6 $1,562.6
SG&A $ 68.6 $ 81.6 $ 88.9 $ 95.7 $105.0 $114.1 $127.9 $ 147.0 $ 173.4 $ 204.9
R&D $ 32.5 $ 45.5 $ 56.4 $ 64.5 $ 71.3 $ 77.1 $ 86.7 $ 119.5 $ 164.2 $ 215.0
SoilServ $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Biopesticides $ 1.1 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8 $ 0.8
Seeds $ 30.8 $ 44.0 $ 53.9 $ 60.8 $ 66.8 $ 72.7 $ 83.0 $ 116.6 $ 160.8 $ 211.1
VMO $ 0.6 $ 0.7 $ 1.7 $ 2.8 $ 3.6 $ 3.6 $ 2.9 $ 2.1 $ 2.5 $ 3.1
Oilseed $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
EBITDA $ 7.9 $ (4.0) $ 10.4 $ 31.5 $ 62.5 $105.8 $174.8 $ 429.6 $ 752.0 $1,142.7
Depreciation $ 4.5 $ 5.1 $ 6.0 $ 7.0 $ 8.1 $ 9.3 $ 10.8 $ 13.1 $ 15.3 $ 17.9
Amortization $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.2 $ 1.2
------ ------ ------ ------ ------ ------ ------ -------- -------- --------
EBIT $ 2.0 $(10.5) $ 3.1 $ 23.2 $ 53.0 $ 95.2 $162.6 $ 415.2 $ 735.5 $1,123.6
Royalty and Venture Income $ (4.1) $ (5.0) $ (4.8) $ (2.7) $ 2.4 $ 12.0 $ 20.6 $ 29.9 $ 37.0 $ 48.2
TOTAL OPERATING INCOME $ (2.1) $(15.5) $ (1.7) $ 20.5 $ 55.4 $107.1 $183.2 $ 445.2 $ 772.6 $1,171.9
LITIGATION EXPENSES $(20.0) $(15.0) $(10.0) $ (5.0) $ (2.0) (2.0) (2.0)
INTEREST EXP./REV. $ (2.8) $ (7.6) $(11.7) $(15.4) $(17.1) $(15.5) $(12.7) $ (4.7) $ 12.2 $ 38.4
PRE-TAX INCOME (TOTAL) $(24.9) $(38.0) $(23.4) $ 0.0 $ 36.2 $ 89.6 $168.4 $ 440.5 $ 784.8 $1,210.3
Taxes (@ 41%) 0.0 0.0 0.0 (0.0) (14.9) (36.7) (69.1) (180.6) (321.7) (496.2)
NOL Utilization 0.0 0.0 0.0 0.0 14.9 20.6 0.0 0.0 0.0 0.0
NET INCOME (24.9) (38.0) (23.4) 0.0 36.2 73.4 99.4 259.9 463.0 714.1
E.P.S. (38.73MM SHARES) $(0.64) $(0.98) $(0.61) $ 0.00 $ 0.94 $ 1.90 $ 2.57 $ 6.71 $ 11.95 $ 18.44
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-43-
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
- -------------------------------------------------------------------------------
CORPORATE BALANCE SHEET PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Cash and Equivalents $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $41.6 $446.5 $1,091.2
Accounts Receivable $59.7 $70.2 $82.9 $97.4 $112.9 $128.9 $149.7 $179.4 $209.0 $244.3
Inventories $65.9 $79.3 $92.2 $106.1 $121.2 $137.4 $158.2 $187.5 $216.6 $250.7
PP&E $105.0 $107.8 $115.1 $138.3 $147.0 $155.0 $186.4 $204.8 $214.8 $227.2
Intangibles $31.6 $30.3 $29.0 $27.6 $26.3 $24.9 $23.6 $22.3 $21.1 $19.9
Prepaid Expenses $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
TOTAL ASSETS $282.5 $307.8 $339.4 $389.7 $427.6 $466.4 $538.1 $653.6 $1,126.1 $1,851.4
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Advances from DAS $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5
Short-term Borrowings $73.1 $131.5 $183.6 $230.9 $228.4 $188.5 $154.0 $0.0 $0.0 $0.0
A/P & Accruals $19.3 $24.2 $27.1 $30.1 $34.3 $39.6 $46.4 $65.5 $65.5 $76.7
Accrued Compensation $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1
Deferred Revenues $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2
Other Current Liabilities $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9
TOTAL CURRENT LIABILITIES $133.1 $196.5 $251.5 $301.7 $303.4 $268.8 $241.1 $96.7 $106.2 $117.4
Long-term Liabilities $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1
Paid-In Capital 0.031 0.031 0.031 0.031 0.031 0.031 0.031 0.031 0.031 0.031
Additional PIC $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7
Retained Earning (Deficit) ($212.4) ($250.5) ($273.9) ($273.9) ($237.6) ($164.2) ($64.8) $195.1 $658.1 $1,372.2
STOCKHOLDERS EQUITY $132.3 $94.2 $70.8 $70.8 $107.1 $180.5 $279.9 $539.8 $1,002.8 $1,716.9
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
TOTAL S.H. EQUITY AND LIAB. $282.5 $307.8 $339.4 $389.7 $427.6 $466.4 $538.1 $653.6 $1,126.1 $1,851.4
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
NET WORKING CAPITAL $93.4 $112.4 $135.1 $160.5 $186.9 $213.8 $248.6 $298.0 $347.2 $405.5
NET ASSETS $198.5 $220.2 $250.1 $298.8 $333.9 $368.8 $435.0 $502.8 $562.1 $632.7
Net Operating Income ($24.9) ($38.0) ($23.4) $0.0 $36.2 $89.6 $168.4 $440.5 $784.8 $1,210.3
Less: Taxes Paid $0.0 $0.0 $0.0 ($0.0) $0.0 ($16.2) ($69.1) ($180.6) ($321.7) ($496.2)
Plus: D&A $5.9 $6.5 $7.4 $8.3 $9.5 $10.6 $12.2 $14.3 $16.5 $19.1
Less: Capital Expenditure ($22.4) ($7.9) ($13.3) ($30.2) ($16.8) ($17.2) ($42.3) ($31.5) ($25.3) $30.3)
Less: Increase in NWC ($28.1) ($19.0) ($22.6) ($25.5) ($26.3) ($26.9) ($34.8) ($49.4) ($49.2) ($58.3)
FREE CASH FLOW ($69.6) ($58.4) ($52.1) ($47.3) $2.5 $39.9 $34.5 $193.4 $404.9 $644.6
- -------------------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
-44-
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
- -------------------------------------------------------------------------------
CORPORATE CASH FLOW STATEMENT ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Net Income ($24.9) ($38.0) ($23.4) $0.0 $36.2 $73.4 $99.4 $259.9 $463.0 $714.1
Depreciation 4.5 5.1 6.0 7.0 8.1 9.3 10.8 13.1 15.3 17.9
Amortization 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.2 1.2
Change in Working Capital:
(INC.) DEC. IN ACCTS. REC. (17.6) (10.5) (12.7) (14.5) (15.4) (16.0) (20.8) (29.7) (29.6) (35.4)
(INC.) DEC. IN INVENTORY (8.8) (13.4) (12.9) (13.9) (15.1) (16.2) (20.8) (29.3) (29.1) (34.1)
(INC.) DEC. IN PPD. EXPENSES -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN ACC. PAY/ACC. (1.8) 4.9 2.9 2.9 4.2 5.3 6.8 9.6 9.5 11.2
INC. (DEC.) IN ACCRUED COMPENSA -- -- -- -- -- -- -- -- -- --
INC. (DEC) IN DEFERRED REVENUES -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN OTHER CURR. LIAB. -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN LT LIABILITIES 1.6 -- -- -- -- -- -- -- -- --
CASH FLOW FROM OPERATIONS (45.6) (50.6) (38.7) (17.1) 19.4 57.1 76.7 224.9 430.2 674.9
Capital Expenditures (22.4) (7.9) (13.3) (30.2) (16.8) (17.2) (42.3) (31.5) (25.3) (30.3)
CASH FLOW FROM INVESTMENTS (22.4) (7.9) (13.3) (30.2) (16.8) (17.2) (42.3) (31.5) (25.3) (30.3)
NET CASH FLOW (68.0) (58.4) (52.1) (47.3) 2.5 39.9 34.5 193.4 404.9 644.6
Debt Issuance (Paydown)
ADVANCES FROM DAS -- -- -- -- -- -- -- -- -- --
SHORT-TERM BORROWINGS 68.0 58.4 52.1 47.3 (2.5) (39.9) (34.5) (154.0) -- --
Equity Issuance -- -- -- -- -- -- -- -- -- --
CASH FLOW (FINANCING) 68.0 58.4 52.1 47.3 (2.5) (39.9) (34.5) (154.0) -- --
NET INC./DEC. IN CASH ($0.0) $0.0 ($0.0) $0.0 ($0.0) $0.0 ($0.0) $39.4 $404.9 $644.6
Cash & Equivalents BOY $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $41.6 $446.5
Cash & Equivalents EOY $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $41.6 $446.5 $1,091.2
- -------------------------------------------------------------------------------
WASSERSTEIN PERELLA & CO.
-45-
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
- --------------------------------------------------------------------------------
CORPORATE NET OPERATING LOSS CARRYFORWARDS/DEBT SCHEDULE ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
NOL Schedule -------- -------- -------- -------- -------- -------- -------- -------- -------- -------
- ------------
Start New NOL Carry(1) $10.2 $25.8 $35.4 $35.4 $35.4 $20.6 $0.0 $0.0 $0.0 $0.0
Taxes Due $0.0 $0.0 $0.0 ($0.0) ($14.9) ($36.7) ($69.1) ($180.6) ($321.7) ($496.2)
Total New NOL Utilized $0.0 $0.0 $0.0 $0.0 $14.9 $20.6 $0.0 $0.0 $0.0 $0.0
Balance Current NOL Carry $10.2 $25.8 $35.4 $35.4 $20.6 $0.0 $0.0 $0.0 $0.0 $0.0
New NOL YTD $10.2 $15.6 $9.6 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Debt Schedule
- -------------
Advances from DAS $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5
BOY Short Term Borrowings 5.1 73.1 131.5 183.6 230.9 228.4 188.5 154.0 - -
Addn. Short-Term Borrow. 68.0 58.4 52.1 47.3 - - - - - -
Debt Paid Down - - - - (2.5) (39.9) (34.5) (154.0) - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
EOY Short-term Borrowings $73.1 $131.5 $183.6 $230.9 $228.4 $188.5 $154.0 $0.0 $0.0 $0.0
(1) Excludes existing NOL's existing prior to 1998. Prior NOL's valued
separately subject to existing utilization limitations.
(2) NOL's generated in 1998-2007 period valued assuming accelerated utilization
due to consolidation with larger entity.
WASSERSTEIN PERELLA & CO.
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-46-
Current as of: Estimated Present Value of NOLs
7/21/98 Option 1
Option 1 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 Present Value
---------------------------------------------------------------------------------------------------
Estimated NOL at 8/31/98
(federal) 228,001,545 18,732,548 18,732,548 18,732,548 18,732,548 4,870,348 - $68,446,166
Estimated Annual Limitation(1) 53,521,566
Estimated R&D Credit 2,071,000 2,071,000 $1,543,017.32
Estimated State NOLs 2,052,014 2,052,014 2,052,014 2,052,014 2,052,014 2,052,014 $10,070,633.87
---------------
PV = $80
Discount rate used for
PV Calculation 6.06% WHEN ITALICIZED AMOUNT FOR FY2003
TURNS NEGATIVE, THE FORMULAS
April 1998 federal tax exempt NEED TO BE MODIFIED.
rate: 5.05% St. Price = $ 30.00
Estimated Value - # of shares
plus options 39,850,340
times buyout price = 1,195,510,200
Est. Contributions During
Past 2 Years 135,677,204
------------- Est. Contributions Prior 2 Years
Sec. 382 Valuation 1,059,832,996 DAS 75,000,000
Exercised 11,899,244
W-2/1099 option income - To be Exercised 48,777,960
exercises thru above date 12,109,587 -----------
W-2/1099 option income - Estimated Contributions 135,677,204
est. exercises at buyout 58,737,120
Restricted Stock taxble inc -
vested thru above date 2,074,838
Restricted Stock inc. est -
not vested thru above date 1,080,000
Estimated 8/31/98 Other Oper.
Loss 30,000,000
Esimated NOL from 8/31/97 124,000,000
-------------
Estimated NOL 228,001,545
Comments:
The available R&D Credit was adjusted down to an estimate of what
will actually be available for use.
The value of the state NOL is a rough estimate.
The capital Loss Carryforward of 2,618,115 was ignored
because of the uncertainty of its use.
Foreign tax credits have been ignored because of the relatively small value.
(1) Limitation may be higher for acquiror other than Dow. Also, some portion of
carryover is not subject to current limitation.
-47-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
- -------------------------------------------------------------------------------
CORPORATE INCOME STATEMENT PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------ ------ ------ ------ ------ ------ ------ ------ ------ --------
Revenues $256.5 $298.5 $355.4 $416.4 $483.2 $552.5 $638.8 $776.6 $925.1 $1,105.0
SoilServ $34.2 $33.4 $33.4 $33.4 $33.4 $33.4 $33.4 $33.4 $33.4 $33.4
Biopesticides $8.3 $7.8 $7.8 $7.8 $7.8 $7.8 $7.8 $7.8 $7.8 $7.8
Seeds $186.4 $221.0 $272.9 $328.0 $392.4 $460.7 $545.5 $681.8 $828.6 $1,006.2
VMO $5.9 $7.4 $8.1 $9.1 $10.2 $11.4 $13.2 $14.9 $16.9 $19.1
Oilseed $21.7 $28.8 $33.2 $38.1 $39.3 $39.1 $38.9 $38.7 $38.5 $38.5
COGS $147.6 $175.3 $200.1 $226.8 $252.6 $278.7 $312.7 $361.5 $408.9 $464.1
Soilserv $22.0 $22.3 $22.3 $22.3 $22.3 $22.3 $22.3 $22.3 $22.3 $22.3
Biopesticides $4.5 $4.9 $4.9 $4.9 $4.9 $4.9 $4.9 $4.9 $4.9 $4.9
Seeds $96.3 $115.8 $135.9 $157.3 $180.9 $206.1 $239.3 $287.1 $333.3 $387.2
VMO $3.9 $4.9 $5.4 $6.1 $6.8 $7.6 $8.5 $9.6 $10.7 $12.0
Oilseed $20.9 $27.5 $31.7 $36.3 $37.8 $37.8 $37.8 $37.8 $37.8 $37.8
GROSS PROFIT $109.0 $123.2 $155.3 $189.6 $230.6 $273.8 $326.1 $415.1 $516.2 $640.9
SG&A $68.6 $81.6 $88.9 $95.7 $105.0 $114.1 $127.9 $147.0 $173.4 $204.9
R&D $36.5 $40.8 $47.9 $50.8 $56.8 $62.7 $71.5 $87.9 $103.6 $123.0
SoilServ $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Biopesticides $1.1 $0.8 $0.8 $0.8 $0.8 $0.8 $0.8 $0.8 $0.8 $0.8
Seeds $34.7 $39.3 $46.1 $48.9 $54.6 $60.5 $69.1 $85.4 $101.0 $120.3
VMO $0.7 $0.6 $1.1 $1.1 $1.4 $1.4 $1.5 $1.6 $1.7 $1.9
Oilseed $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
EBITDA $3.9 $0.7 $18.4 $43.1 $68.8 $97.0 $126.7 $180.2 $239.2 $313.0
Depreciation $3.6 $4.0 $4.6 $5.2 $6.1 $7.1 $8.3 $10.0 $11.8 $14.0
Amortization $2.6 $2.6 $2.6 $2.6 $2.6 $2.6 $1.8 $1.3 $1.2 $1.2
------- -------- ------ ------ ------ ------ ------ ------ ------ ------
EBIT ($2.4) ($5.9) $11.2 $35.2 $60.0 $87.3 $116.5 $168.9 $226.3 $297.8
Royalty and Venture Income ($4.1) ($5.0) ($4.8) ($1.5) $3.4 $11.8 $16.4 $22.7 $24.9 $30.3
TOTAL OPERATING INCOME ($6.5) ($10.9) $6.4 $33.7 $63.4 $99.0 $133.0 $191.6 $251.1 $328.1
LITIGATION EXPENSES ($20.0) ($15.0) ($10.0) ($5.0) ($2.0) (2.0)
INTEREST EXP./REV. ($3.0) ($7.7) ($11.4) ($14.2) ($14.7) ($13.5) ($12.3) ($10.4) ($5.7) $1.1
PRE-TAX INCOME (TOTAL) ($29.5) ($33.6) ($15.0) $14.5 $46.7 $83.6 $120.6 $181.2 $245.5 $329.2
Taxes (@41%) 0.0 0.0 0.0 (6.0) (19.1) (34.3) (49.5) (74.3) (100.6) (135.0)
NOL Utilization 0.0 0.0 0.0 6.0 19.1 6.9 0.0 0.0 0.0 0.0
NET INCOME (29.5) (33.6) (15.0) 14.5 46.7 56.2 71.2 106.9 144.8 194.2
E.P.S. (38.35 MM SHARES) ($0.77) ($0.88) ($0.39) $0.38 $1.22 $1.47 $1.86 $2.79 $3.78 $5.06
WASSERSTEIN PERELLA & CO.
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-48-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
- -------------------------------------------------------------------------------
CORPORATE BALANCE SHEET PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------ ------ ------ ------ ------ ------ ------ ------ ------ --------
Cash and Equivalents $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $92.7
Accounts Receivable $60.1 $70.7 $83.3 $97.9 $113.3 $129.4 $150.2 $179.9 $209.5 $244.9
Inventories $66.5 $79.9 $92.8 $106.7 $121.9 $138.4 $158.9 $188.2 $217.4 $251.6
PP&E $105.1 $108.1 $119.4 $139.2 $148.3 $160.4 $188.1 $206.8 $217.1 $299.7
Intangibles $30.3 $27.7 $25.1 $22.4 $19.8 $17.7 $15.3 $14.0 $12.8 $11.6
Prepaid Expenses $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1 $18.1
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL ASSETS $282.3 $306.6 $340.9 $386.5 $423.5 $465.2 $532.8 $609.2 $677.1 $848.5
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Advances form DAS $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5
Short-term Borrowings $77.3 $130.2 $176.5 $204.6 $190.8 $171.0 $160.5 $120.4 $34.0 $0.0
A/P & Accruals $19.5 $24.4 $27.4 $30.3 $34.5 $39.8 $46.6 $56.2 $65.7 $76.9
Accrued Compensation $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1 $6.1
Deferred Revenues $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2 $8.2
Other Current Liabilities $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9 $12.9
TOTAL CURRENT LIABILITIES $137.5 $195.4 $244.6 $275.7 $266.0 $251.5 $247.9 $217.4 $140.5 $117.7
Long-term Liabilities $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1 $17.1
Paid In Capital 0.031 0.031 0.031 0.031 0.031 0.031 0.031 0.031 0.031 0.031
Additional PIC $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7 $344.7
Retained Earning (Deficit) ($217.0) ($250.6) ($265.6) ($251.1) ($204.4)($148.1) ($77.0) $29.9 $174.8 $369.0
STOCKHOLDERS EQUITY $127.7 $94.1 $79.1 $93.6 $140.3 $196.6 $267.7 $374.6 $519.5 $713.7
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
TOTAL S.H. EQUITY AND LIAB. $282.3 $306.6 $340.9 $386.5 $423.5 $465.2 $532.8 $609.2 $677.1 $848.5
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ ------ ------ ------ ------ -------
NET WORKING CAPITAL $94.3 $113.3 $136.0 $161.4 $187.8 $214.8 $249.6 $299.0 $348.3 $406.6
NET ASSETS $199.3 $221.4 $255.3 $300.6 $336.1 $375.1 $437.7 $505.8 $565.4 $636.3
Net Operating Income ($29.5) ($33.6) ($15.0) $14.5 $46.7 $83.6 $120.6 $181.2 $245.5 $329.2
Less: Taxes paid $0.0 $0.0 $0.0 $0.0 $0.0 ($27.4) ($49.5) ($74.3) ($100.6) ($135.0)
Plus: D&A $6.3 $6.6 $7.2 $7.9 $8.8 $9.7 $10.1 $11.2 $13.0 $15.2
Less: Capital Expenditure ($21.5) ($7.0) ($15.9) ($25.0) ($15.2) ($19.2) ($36.0) ($28.7) ($22.1) ($26.6)
Less: Increase In NWC ($29.0) ($19.0) ($22.7) ($25.5) ($26.4) ($27.0) ($34.9) ($49.4) ($49.3) ($58.4)
FREE CASH FLOW ($73.7) ($53.0) ($46.3) ($28.1) $13.9 $19.8 $10.5 $40.1 $86.4 $124.5
WASSERSTEIN PERELLA & CO.
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-49-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
- --------------------------------------------------------------------------------
CORPORATE CASH FLOW STATEMENT ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-------- -------- -------- -------- -------- -------- -------- -------- -------- ------
Net Income ($29.5) ($33.6) ($15.0) $14.5 $46.7 $56.2 $71.2 $106.9 $144.8 $194.2
Depreciation 3.6 4.0 4.6 5.2 6.1 7.1 8.3 10.0 11.8 14.0
Amortization 2.6 2.6 2.6 2.6 2.6 2.6 1.8 1.3 1.2 1.2
Change in Working Capital:
(INC.) DEC. IN ACCTS. REC. (18.0) (10.5) (12.7) (14.5) (15.5) (16.0) (20.8) (29.7) (29.6) (35.4)
(INC.) DEC. IN INVENTORY (9.4) (13.4) (12.9) (13.9) (15.1) (16.2) (20.8) (29.3) (29.2) (34.2)
(INC.) DEC. IN PPD. EXPENSES -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN ACC. PAY/ACC. (1.6) 4.9 2.9 3.0 4.2 5.3 6.8 9.6 9.5 11.2
INC. (DEC.) IN ACCRUED COMPENSA -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN DEFERRED REVENUES -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN OTHER CURR. LIAB. -- -- -- -- -- -- -- -- -- --
INC. (DEC.) IN LT LIABILITIES 1.6 -- -- -- -- -- -- -- -- --
CASH FLOW FROM OPERATIONS (50.6) (46.0) (30.4) (3.1) 29.1 39.0 46.4 68.7 108.5 151.1
Capital Expenditures (21.5) (7.0) (15.9) (25.0) (15.2) (19.2) (36.0) (28.7) (22.1) (26.6)
CASH FLOW FROM INVESTMENTS (21.5) (7.0) (15.9) (25.0) (15.2) (19.2) (36.0) (28.7) (22.1) (26.6)
Net Cash Flow (72.2) (53.0) (46.3) (28.1) 13.9 19.8 10.5 40.1 86.4 124.5
Debt Issuance (Paydown)
ADVANCES FROM DAS -- -- -- -- -- -- -- -- -- --
SHORT-TERM BORROWINGS 72.2 53.0 46.3 28.1 (13.9) (19.8) (10.5) (40.1) (86.4) (34.0)
Equity Issuance -- -- -- -- -- -- -- -- -- --
CASH FLOW (FINANCING) 72.2 53.0 46.3 28.1 (13.9) (19.8) (10.5) (40.1) (86.4) (34.0)
NET INC./DEC. IN CASH $0.0 ($0.0) $0.0 $0.0 ($0.0) $0.0 $0.0 ($0.0) $0.0 $90.5
Cash & Equivalents BOY $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2
Cash & Equivalents EOY $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $92.7
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-50-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
- --------------------------------------------------------------------------------
CORPORATE NET OPERATING LOSS CARRYFORWARDS / DEBT SCHEDULE ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
NOL SCHEDULE
Start New NOL Carry(1) $12.1 $25.9 $32.0 $32.0 $26.1 $6.9 $0.0 $0.0 $0.0 $0.0
Taxes Due $0.0 $0.0 $0.0 ($6.0) ($19.1) ($34.3) ($49.5) ($74.3) ($100.6) ($135.0)
Total New NOL Utilized $0.0 $0.0 $0.0 $6.0 $19.1 $6.9 $0.0 $0.0 $0.0 $0.0
Balance Current NOL Carry $12.1 $25.9 $32.0 $26.1 $6.9 $0.0 $0.0 $0.0 $0.0 $0.0
New NOL YTD $12.1 $13.8 $6.2 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
DEBT SCHEDULE
Advances from DAS $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5 $13.5
BOY Short Term Borrowings 5.1 77.3 130.2 176.5 204.6 190.8 171.0 160.5 120.4 34.0
Addn. Short-Term Borrow. 72.2 53.0 46.3 28.1 -- -- -- -- -- --
Debt Paid Down -- -- -- -- (13.9) (19.8) (10.5) (40.1) (86.4) (34.0)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------
EOY Short-term Borrowings $77.3 $130.2 $176.5 $204.6 $190.8 $171.0 $160.5 $120.4 $34.0 $0.0
(1) Excludes existing NOL's existing prior to 1998. Prior NOL's valued
seperately subject to existing utilization limitations
(2) NOL's generated in 1998-2007 period valued assuming accelerated
utilization due to consolidation with larger entity
WASSERSTEIN PERELLA & CO.
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-51-
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
- --------------------------------------------------------------------------------
CORPORATE FINANCIAL RATIO PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-------- -------- -------- -------- -------- -------- -------- -------- -------- ------
COGS/Sales 58.5% 59.7% 57.1% 54.7% 51.9% 49.4% 47.7% 45.2% 43.0% 40.9%
SG&A/Sales 27.2% 27.8% 25.4% 23.1% 21.6% 20.2% 19.5% 18.4% 18.3% 18.0%
R&D/Sales 14.5% 13.9% 13.7% 12.3% 11.7% 11.1% 10.9% 11.0% 10.9% 10.8%
Royalty/Sales -1.6% -1.7% -1.4% -0.4% 0.7% 2.1% 2.6% 2.9% 2.7% 2.7%
Operating Margin 1.3% -0.1% 5.2% 11.3% 16.1% 20.5% 23.1% 26.6% 29.0% 31.5%
EBITDA/Sales 1.5% 0.2% 5.3% 10.4% 14.1% 17.2% 19.3% 22.5% 25.2% 27.6%
EBIT/Sales -0.9% -2.0% 3.2% 8.5% 12.3% 15.5% 17.8% 21.1% 23.8% 26.2%
Net Inc./Sales -11.7% -11.4% -4.3% 3.5% 9.6% 10.0% 10.9% 13.4% 15.2% 17.1%
Working Cap/Sales 37.4% 38.6% 38.8% 38.9% 38.6% 38.1% 38.1% 37.4% 36.7% 35.8%
Depreciation/PP&E 3.5% 3.7% 3.8% 3.8% 4.1% 4.4% 4.4% 4.8% 5.4% 6.1%
Depreciation/Sales 1.4% 1.4% 1.3% 1.3% 1.3% 1.3% 1.3% 1.2% 1.2% 1.2%
PPE/Sales 41.6% 36.8% 34.0% 33.5% 30.5% 28.4% 28.7% 25.9% 22.8% 20.2%
Debt/Assets 38.8% 58.8% 69.1% 68.1% 56.8% 45.6% 36.7% 23.8% 6.0% 0.0%
Coverage (EBIT/Interest) -0.8x -0.8x 1.0x 2.5x 4.1x 6.5x 9.5x 16.2x 39.8x -271.4x
Debt/Total Cap. 38.8% 58.8% 69.1% 68.1% 56.8% 45.6% 36.7% 23.8% 6.0% 0.0%
WASSERSTEIN PERELLA & CO.
- --------------------------------------------------------------------------------
-52-
MYCOGEN CORPORATION
- -------------------------------------------------------------------------------
-------------------
COMPARABLE ANALYSIS
-------------------
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-53-
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
SELECTED SEED COMPARABLE COMPANIES ANALYSIS
TRADING STATISTICS
- ------------------
CURRENT EQUITY ADJUSTED PRICE/EARNINGS EST. 3-5 98E P/E/
PRICE MARKET MARKET -------------- YR. EPS 3-5 YEAR PRICE/
COMPANY 7/28/98 VALUE VALUE 1997 1998E GTH. EPS GLB(1) BOOK
- ----------------------------------------------------------------------------------------------------------
(IN $) (IN $ MM) (IN $ MM) (x) (x) (%) (x) (x)
Mycogen 23.50 839.3 974.7 NM NM 22.5 NM 4.4
Pioneer Hi-Bred 33.00 7,972.2 7,774.2 33.5 28.8 15.0 1.92 5.7
Dekalb Genetics(2) 70.07 2,525.0 2,765.0 87.0 89.8 25.0 3.59 11.2
Delta & Pine Land 46.11 1,823.0 1,890.3 93.4 72.1 30.0 2.40 18.3
Agribiotech(3) 19.69 663.0 661.6 NM 82.0 40.0 2.05 8.2
---------------------------------------------------------
Mean 71.3 68.2 27.5 2.49 10.9
Median 87.0 77.0 27.5 2.23 9.7
High 93.4 89.8 40.0 3.59 18.3
Low 33.5 28.8 15.0 1.92 5.7
---------------------------------------------------------
ADJUSTED MARKET VALUE
------------------------------------------------------------------------------------------------ Net Debt/
1997 LTM 1998E 1999E 1997 LTM 1998E 1999E 1997 LTM 1998E 1999E MARKET
COMPANY SALES SALES SALES SALES EBITDA EBITDA EBITDA EBITDA EBIT EBIT EBIT EBIT CAP.
- -----------------------------------------------------------------------------------------------------------------------------------
(x) (x) (x) (x) (x) (x) (x) (x) (x) (x) (x) (x) (%)
Mycogen 4.62 4.47 3.80 3.27 NM NM NM NM NM NM NM NM 9.1
Pioneer Hi-Bred 4.36 4.23 4.01 3.75 17.2 16.9 15.0 12.8 21.4 20.9 17.9 15.0 (2.6)
Dekalb Genetics(3) 6.13 5.42 5.80 5.22 45.3 56.5 44.6 35.4 58.5 83.0 58.8 46.1 9.5
Delta & Pine Land 10.32 9.33 7.13 5.33 50.8 57.5 33.3 22.4 58.9 71.4 37.2 24.1 3.6
Agribiotech(3) 2.38 2.38 2.59 1.29 57.7 57.7 57.9 22.4 NM NM 76.7 25.4 (0.2)
-------------------------------------------------------------------------------------------------------------------------
Mean 5.00 5.34 4.88 3.90 42.7 47.2 37.7 23.3 46.2 58.5 47.7 27.6 2.6
Medium 5.24 4.82 4.90 4.48 48.0 57.0 38.9 22.4 58.5 71.4 48.0 24.8 1.7
High 10.32 9.33 7.13 5.33 57.7 57.7 57.9 35.4 58.9 83.0 76.7 46.1 9.5
Low 2.38 2.38 2.59 1.29 17.2 16.9 15.0 12.8 21.4 20.9 17.9 15.0 (2.6)
-------------------------------------------------------------------------------------------------------------------------
OPERATING STATISTICS
- --------------------
TOTAL REVENUES
------------------------------ EBITDA MARGIN EBIT MARGIN
LTM 97/96% 98E/97% -------------------------------- ------------------------------
COMPANY AMOUNT GROWTH GROWTH 1997 LTM 1998E 1999E 1997 LTM 1998E 1999E
- ------- ------ ------ ------- ---- --- ----- ----- ---- --- ----- -----
(IN $ MM) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Mycogen 218 35.6 21.6 3.4 1.2 3.1 NM NM NM 0.8 NM
Pioneer Hi-Bred 1,840 3.7 8.7 25.3 25.1 26.8 29.4 20.3 20.2 22.4 25.1
Dekalb Genetics(2) 510 16.5 5.7 13.5 9.6 13.0 14.7 10.5 6.5 9.9 11.3
Delta & Pine Land(2) 203 19.6 44.8 20.3 16.2 21.4 23.8 17.5 13.1 19.1 22.1
Agribiotech(3) 277 NA (8.1) 4.1 4.1 4.5 5.8 2.1 2.1 3.4 5.1
---------------------------------------------------------------------------------------------------------------------------
Mean 13.2 12.8 15.8 13.7 16.4 18.4 12.6 10.5 13.7 15.9
Median 16.5 7.2 16.9 12.9 17.2 19.2 14.0 9.8 14.5 16.7
High 19.6 44.8 25.3 25.1 26.8 29.4 20.3 20.2 22.4 25.1
Low 3.7 (8.1) 4.1 4.1 4.5 5.8 2.1 2.1 3.4 5.1
---------------------------------------------------------------------------------------------------------------------------
NET INCOME MARGIN R&D/TOTAL REVENUES
----------------------------- ----------------------
1997 LTM 1998E 1999E 1997 1998E 1999E
---- --- ----- ----- ---- ----- -----
(%) (%) (%) (%) (%) (%) (%)
Mycogen NM NM NM NM 11.4 12.7 15.3
Pioneer Hi-Bred 13.6 14.6 15.0 16.9 8.2 7.7 7.8
Dekalb Genetics(2) 6.4 4.3 6.1 7.1 12.7 12.6 15.1
Delta & Pine Land(2) 10.7 6.9 10.1 11.8 7.4 6.1 4.7
Agribiotech(3) NM NM 1.9 2.3 NA NA NA
-----------------------------------------------------------------------------
Mean 10.2 8.6 8.3 9.5 9.4 8.8 9.2
Median 10.7 6.9 8.1 9.4 8.2 7.7 7.8
High 13.6 14.6 15.0 16.9 12.7 12.6 15.1
Low 6.4 4.3 1.9 2.3 7.4 6.1 4.7
-----------------------------------------------------------------------------
- ----------------------
1997 data refers to FYE 8/31/97, etc. All means and medians exclude Mycogen.
Currency are converted at current exchange rates.
EPS projections are based on 1/8/E/S consensus; other projections are based
on selected brokers' research except Mycogen projections are provided by the
management.
When not available, depreciation and amortization are estimated as a
percentage of sales based on the latest released data.
When not available, LTM data is based on selected brokers' research.
(1) Represents ratio of the 1998E P/E ratio to the estimated 3-5 year
earnings growth rate.
(2) Stock price is calculated as the average of 30-day stock prices before
the announcement of Monsanto transactions.
(3) Agribiotech fiscal year end 6/30. LTM data represents financials for 1997
fiscal year end pro forma for acquisitions, EBITDA estimaged per analyst
projections of D&A margins.
- -------------------------------------------------------------------------------
-54-
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
SELECTED COMPARABLE COMPANIES QUARTERLY ANALYSIS FOR FISCAL YEAR 1997
EBITDA MARGIN EBIT MARGIN
----------------------------------- --------------------------------------
1-QTR 2-QTR 3-QTR 4-QTR 1-QTR 2-QTR 3-QTR 4-QTR
----- ----- ----- ----- ----- ----- ----- -----
Mycogen (44.7%) 8.3% 13.5% (6.2%) (55.4%) 5.5% 10.6% (16.4%)
Pioneer Hi-Bred (57.8%) 6.1% 41.8% (35.2%) (78.9%) (2.3%) 40.0% (52.8%)
Dekalb Genetics 11.0% 16.1% 14.2% (19.4%) 6.4% 14.5% 12.5% (53.0%)
Delta & Pine Land (82.8%) 25.2% 29.5% NM (101.6%) 23.3% 28.4% NM
Agribiotech(1) (14.0%) (4.1%) 8.6% (2.3%) (16.4%) (6.1%) 7.0% (3.8%)
------------------------------------------------------------------------------------------------
Mean (35.9%) 10.8% 23.5% (19.0%) (47.6%) 7.4% 22.0% (36.5%)
Median (35.9%) 11.1% 21.8% (19.4%) (47.7%) 6.1% 20.4% (52.8%)
------------------------------------------------------------------------------------------------
NET INCOME MARGIN R&D/TOTAL REVENUES
----------------------------------- --------------------------------------
1-QTR 2-QTR 3-QTR 4-QTR 1-QTR 2-QTR 3-QTR 4-QTR
----- ----- ----- ----- ----- ----- ----- -----
Mycogen (54.7%) 3.7% 6.8% (48.4%) 26.3% 7.8% 6.9% 22.3%
Pioneer Hi-Bred (50.0%) (0.8%) 25.8% (29.6%) 33.3% 12.5% 3.1% 30.3%
Dekalb Genetics 3.1% 8.5% 7.3% (20.1%) 8.9% 13.2% 12.8% 23.1%
Delta & Pine Land (65.5%) 14.1% 17.9% NM 41.0% 5.2% 3.3% NM
Agribiotech(1) (16.9%) (8.9%) 6.4% (6.2%) 1.2% 2.1% 1.4% 2.0%
--------------------------------------------------------------------------------------------
Mean (32.3%) 3.2% 14.3% (18.6%) 21.1% 8.3% 5.2% 18.5%
Median (33.5%) 3.9% 12.6% (20.1%) 21.1% 8.8% 3.2% 23.1%
--------------------------------------------------------------------------------------------
DAYS RECEIVABLE DAYS OF INVENTORY
----------------------------------- -----------------------------------
1-QTR 2-QTR 3-QTR 4-QTR 1-QTR 2-QTR 3-QTR 4-QTR
----- ----- ----- ----- ----- ----- ----- -----
Mycogen(2)(3) 129 61 85 109 761 145 89 257
Pioneer Hi-Bred(2) 178 79 34 162 1,490 515 68 558
Dekalb Genetics(2)(4) 69 33 79 357 526 147 97 1,361
Delta & Pine Land 92 99 99 NM 1,067 144 50 NM
Agribiotech(1) 97 61 81 64 289 189 122 113
----------------------------------------------------------------------------------------------------
Mean 109 68 73 194 843 249 84 677
Median 94 70 80 162 796 168 83 558
----------------------------------------------------------------------------------------------------
DAYS PAYABLE NET DEBT/BOOK EQUITY
----------------------------------- -----------------------------------
1-QTR 2-QTR 3-QTR 4-QTR 1-QTR 2-QTR 3-QTR 4-QTR
----- ----- ----- ----- ----- ----- ----- -----
Mycogen(2)(3) 216 40 25 95 (3.4%) 8.4% 24.5% 19.5%
Pioneer Hi-Bred(2) 718 147 29 108 19.3% (30.8%) (9.7%) 1.7%
Dekalb Genetics(2)(4) 249 44 11 153 71.8% 35.7% 72.4% 60.8%
Delta & Pine Land 314 38 12 NM 66.1% 103.1% 34.7% 39.9%
Agribiotech(1) 104 92 64 52 (16.8%) 60.4% 64.3% 56.4%
----------------------------------------------------------------------------------------------------
Mean 346 80 29 104 35.1% 42.1% 40.4% 39.7%
Median 281 68 21 108 42.7% 48.0% 49.5% 48.2%
----------------------------------------------------------------------------------------------------
- ------------------
Note: Days calculation assumes 360-day a year and all means and medians
exclude Mycogen data
(1) Agribiotech data are not pro forma of acquisition
(2) Data not available to separate notes receivable from acounts receivable
for quarterly data
(3) 2nd and 3rd quarter net debts include $14.25 million unsecured note
payable to bank that was specified in the 10-K
(4) Accounts Payable includes only trade accounts payable
- -------------------------------------------------------------------------------
-55-
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
SELECTED SEED COMPARABLE COMPANIES ANALYSIS FOR FISCAL YEAR 1994-1997
EBITDA MARGIN EBIT MARGIN
---------------------------------- -----------------------------------
1994 1995 1996 1997 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
Mycogen (5.3%) (5.8%) (8.7%) 3.4% (11.0%) (13.7%) (14.5%) (1.3%)
Pioneer Hi-Bred 25.4% 23.1% 24.6% 25.3% 20.4% 18.3% 20.2% 20.3%
Dekalb Genetics 10.2% 11.1% 11.4% 13.5% 6.6% 7.6% 8.5% 10.5%
Delta & Pine Land 19.3% 22.5% 20.4% 20.3% 16.1% 19.4% 17.7% 17.5%
Agribiotech (1) NM (27.0%) (9.0%) (0.7%) NM (29.9%) (11.2%) (2.4%)
- -----------------------------------------------------------------------------------------------------------------------
MEAN 18.3% 7.4% 11.8% 14.6% 14.4% 3.8% 8.8% 11.5%
MEDIAN 19.3% 16.8% 15.9% 16.9% 16.1% 12.9% 13.1% 14.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME MARGIN R&D/TOTAL REVENUES
---------------------------------- -----------------------------------
1994 1995 1996 1997 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
Mycogen (8.8%) (14.1%) (19.6%) (8.5%) 16.1% 18.7% 15.2% 11.4%
Pioneer Hi-Bred 12.4% 11.9% 13.0% 13.6% 7.7% 8.5% 7.9% 8.2%
Dekalb Genetics 3.5% 3.0% 4.4% 6.4% 13.8% 13.3% 12.3% 12.7%
Delta & Pine Land 9.7% 11.1% 10.5% 10.7% 6.8% 6.7% 6.4% 7.4%
Agribiotech (1) NM (29.6%) (12.8%) (4.1%) NM 1.2% 0.2% 1.8%
- -----------------------------------------------------------------------------------------------------------------------
MEAN 8.6% (0.9%) 3.8% 6.7% 9.4% 7.4% 6.7% 7.5%
MEDIAN 9.7% 7.0% 7.4% 8.6% 7.7% 7.6% 7.1% 7.8%
- -----------------------------------------------------------------------------------------------------------------------
SELLING/TOTAL REVENUES G&A MARGIN
---------------------------------- -----------------------------------
1994 1995 1996 1997 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
Mycogen 22.4% 20.8% 24.3% 19.8% 14.9% 11.7% 12.7% 8.5%
Pioneer Hi-Bred 22.7% 23.1% 22.2% 21.0% 8.3% 8.2% 7.5% 7.3%
Dekalb Genetics 19.3% 20.2% 18.8% 18.2% 5.7% 8.1% 8.3% 7.6%
Delta & Pine Land 7.2% 7.7% 6.2% 6.0% 10.1% 9.7% 6.1% 5.5%
Agribiotech (1) NA NA NA NA NA NA NA NA
- -----------------------------------------------------------------------------------------------------------------------
MEAN 16.4% 17.0% 15.7% 15.1% 8.0% 8.7% 7.3% 6.8%
MEDIAN 19.3% 20.2% 18.8% 18.2% 8.3% 8.2% 7.5% 7.3%
- -----------------------------------------------------------------------------------------------------------------------
DAYS RECEIVABLE DAYS OF INVENTORY
---------------------------------- -----------------------------------
1994 1995 1996 1997 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
Mycogen 86 89 70 70 182 181 143 162
Pioneer Hi-Bred 39 38 44 52 213 239 189 205
Dekalb Genetics (2)(3) 53 65 48 42 218 235 177 217
Delta & Pine Land 11 19 157 187 144 130 153 133
Agribiotech (1) NM 54 104 95 NM 145 136 170
- -----------------------------------------------------------------------------------------------------------------------
MEAN 34 44 88 94 192 187 164 181
MEDIAN 39 46 76 74 213 190 165 188
- -----------------------------------------------------------------------------------------------------------------------
DAYS PAYABLE NET DEBT/BOOK EQUITY
---------------------------------- -----------------------------------
1994 1995 1996 1997 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
Mycogen 22 36 33 60 (30.2%) (13.5%) (36.7%) 19.5%
Pioneer Hi-Bred 48 33 44 40 (6.1%) (4.9%) (4.8%) 1.7%
Dekalb Genetics (2)(3) 14 15 24 24 102.1% 98.8% 36.6% 60.8%
Delta & Pine Land 28 40 55 59 31.8% 11.0% 48.3% 39.9%
Agribiotech (1) NM 56 82 77 (45.4%) (9.3%) 29.9% 56.4%
- -----------------------------------------------------------------------------------------------------------------------
MEAN 30 36 51 50 20.6% 26.4% 27.5% 39.7%
MEDIAN 28 36 50 49 12.8% 8.0% 33.2% 48.2%
- -----------------------------------------------------------------------------------------------------------------------
- ---------------------------
NOTE: DAYS CALCULATION ASSUMES 360-DAY A YEAR AND ALL MEANS AND MEDIANS
EXCLUDE MYCOGEN DATA
(1) Agribiotech changed its fiscal year end in 1995. 1995 data are based on
nine-month period ended 6/30/95. 1997 data are not pro forma of acquisition
because no pro forma balance sheet number available for ratio calculation
(2) Data not available to separate trade receivables from note receivables
(3) Accounts Payable includes only trade accounts payable
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-56-
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
SELECTED COMPARABLE ACQUISITION / VALUATION MULTIPLES
Implied Value
Adjusted Purchase Price / of Equity /
Implied Adjusted -------------------------- ----------------
Close Value Purchase LTM LTM LTM Net Book
Target Acquirer Date of Equity Price Sales EBITDA EBIT Income Value
- -------------- -------- -------- ---------- ------------ ------- ------- ------ -------- -------
SEED COMPANIES
- --------------
DELTA & PINE LAND MONSANTO PENDING $1,832.5 $1,906.7 9.87 x 69.8 x 89.6 x NM x 25.1 x
Sunseeds AgrEvo 10/6/97 NA NA 2.20 x 13.1 x 18.0 x NA x NA x
PIONEER HI-BRED
(16.6% STAKE) DUPONT 9/18/97 $1,700.0 $1,700.0 4.60 x 18.4 x 22.6 x 33.9 x 8.9 x
Holden's Foundation
Seeds Monsanto 9/4/97 NA $975.0(1) 21.67 x NA x NA x NA x NA x
Asgrow Corn & Seed Monsanto 2/4/97 NA $240.0 1.41 x NA NA NA NA
Morgan Seeds Mycogen Corp. 10/1/96 $40.9 $40.9 1.10 x NA NA NA NA
Agracetus
(W.R. Grace) Monsanto 5/21/96 $150.0 $150.0 NA NA NA NA NA
Sure Grow Delta & Pine Land 5/21/96 $70.0 $78.9 3.47 17.5 19.1 29.9 3.2
Jacobs Hertz Seed
(Monsanto) Delta & Pine Land 2/5/96 NA NA NA NA NA NA NA
Cargill - Cotton &
Seed Delta & Pine Land 5/3/94 NA NA NA NA NA NA NA
- ---------------------------
(1) Final terms not disclosed; purchase price assumes maximum expected price.
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-57-
MYCOGEN CORPORATION COMPARABLE ANALYSIS
- -------------------------------------------------------------------------------
SELECTED COMPARABLE ACQUISITION / VALUATION MULTIPLES (CONT'D)
Implied Value
Adjusted Purchase Price / of Equity /
Implied Adjusted -------------------------- ----------------
Close Value Purchase LTM LTM LTM Net Book
Target Acquirer Date of Equity Price Sales EBITDA EBIT Income Value
- -------------- -------- -------- ---------- ------------ ------- ------- ------ -------- -------
BIOTECH COMPANIES (MAJORITY STAKES)
- -----------------------------------
Monsanto American Home Pending(1) $35,563.7 $39,134.7 5.09 x 36.4 x 70.8 x NM x 8.1 x
Products
Plant Breeding Int'l
(Unilever) Monsanto Pending $523.0 $523.0 19.96(2) NA NA NA NA
DEKALB GENETICS MONSANTO PENDING $3,771.2(3) $3,881.2(3) 8.28 x 61.2 x 79.7 x NM x 16.9 x
Zeneca Mogen 5/13/97 $73.6 $73.6 12.80 x NM x NM x NM x NA
Bionova (ELM) DNA Plant Tech. 9/27/96 $63.4 $67.9 NM x NM x NM x NM x NA
Plant Genetic Systems AgrEvo 8/30/96 $733.0 $733.0 NM x NM x NM x NM x NA
CALGENE INC. MONSANTO 4/1/96 $299.8(3) $268.0(3) 4.80 x NM x NM x NM x 3.1 x
(49.9% SHARES)
Mycogen DowElanco 3/8/96 $444.7(3) $358.1(3) 2.90 x NM x NM x NM x 2.3 x
(9.5mm shares)
United AgriSeeds Inc. Mycogen 2/28/96 $72.4 $72.4 NA NA NA NA NA
Lubrizol Mycogen 1/15/96 NA NA NA NA NA NA NA
- ---------------------------
(1) Monsanto operating data are not pro forma of all announced acquisitions
and acquisitions Monsanto is currently bidding
(2) Sales multiple calculated based on PBIC's royalty revenue
(3) Calculated by translating the price that acquiror paid for part of the
target into price for the entire company
WASSERSTEIN PERELLA & CO.
- -------------------------------------------------------------------------------
-58-