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August 31, 1998
Special Committee of the Board of Directors
Mycogen Corporation
5501 Oberlin Drive
San Diego, CA 92121
Members of the Special Committee of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders (other than The Dow Chemical Company and
its affiliates (collectively, the "Dow Group")) of shares of common stock, par
value $.001 per share (the "Shares"), of Mycogen Corporation, a California
corporation (the "Company"), of the consideration to be received by such holders
in the Transactions (as defined below) pursuant to the Agreement and Plan of
Merger, dated as of August 31, 1998, by and among the Company, Dow AgroSciences
LLC ("Parent") and AgroSciences Acquisition Inc. ("Acquisition") (the "Merger
Agreement"). The Merger Agreement provides for, among other things, a cash
tender offer (the "Tender Offer") by Acquisition to acquire all of the
outstanding Shares, other than Shares held by members of the Dow Group, at a
price of $28.00 per Share, net to the seller in cash (the "Cash Price"), and for
a subsequent merger of Acquisition with and into the Company pursuant to which
each outstanding Share (other than as provided in the Merger Agreement) will be
converted into the right to receive the Cash Price (the "Merger" and, together
with the Tender Offer, the "Transactions"). The terms and conditions of the
Transactions are set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed the financial
terms and provisions of a draft of the Merger Agreement, and for purposes
hereof, we have assumed that the financial terms and provisions of the final
form of the Merger Agreement will not differ in any material respect from the
draft provided to us. We also reviewed the Exchange and Purchase Agreement,
dated January 15, 1996, among the Company, Agrigenetics, Inc., DowElanco and
United Agriseeds, Inc. (the "Exchange Agreement"), including the Dow Group's
rights and obligations thereunder both if the Transactions are completed and not
completed. We further reviewed and analyzed certain publicly available business
and financial information relating to the Company for recent years and interim
periods to date, as well as certain internal financial and operating
information, financial forecasts, projections and analyses prepared by or on
behalf of the Company and provided to us for purposes of our analysis. We have
met with certain representatives of the Company and the Dow Group to review and
discuss such information and, among other matters, the Company's business,
financial condition, results of operations and prospects.
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Special Committee of the Board of Directors
August 31, 1998
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We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the seed and agrobiotech industries specifically, and in other
industries generally, which we believe to be reasonably comparable to the
Transactions or otherwise relevant to our inquiry. We have also performed such
other studies, analyses and investigations and reviewed such other information
as we considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, including
the financial projections, forecasts, analyses and other information provided to
us, and we have not assumed any responsibility for independent verification of,
and express no opinion as to, any of such information. We also have relied upon
the reasonableness and accuracy of the unadjusted projections, forecasts,
analyses and other information furnished to us, and have assumed, with the
Special Committee's consent, that such projections, forecasts and analyses and
other information were reasonably prepared in good faith and on bases reflecting
the best currently available judgments and estimates of the Company's management
as of the date hereof and that management of the Company is unaware of any facts
that would make the projections, forecasts and other information provided to us
incomplete or misleading. We express no opinion with respect to such
projections, forecasts and analyses or the assumptions on which they are based.
We have not reviewed any of the books and records of the Company or Parent, and
although we have visited selected facilities, we were not retained to conduct,
nor have we assumed any responsibility for conducting, a physical inspection of
the properties or facilities of the Company or Parent, or for making or
obtaining an independent valuation or appraisal of the assets or liabilities of
the Company or Parent, and no such independent valuation or appraisal was
provided to us. Our opinion is necessarily based on economic and market
conditions and other circumstances as they exist and can be evaluated by us as
of the date hereof. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Finally, we have assumed that the transactions
described in the Merger Agreement will be consummated on the terms set forth
therein, without material waiver or modification.
In the context of our engagement, we have not been authorized to and have
not solicited alternative offers for the Company or its assets, or investigated
any other alternative transactions which may be available to the Company. We
express no opinion with respect to the Third Party Sale Value of the Company as
such term is defined in the Exchange Agreement.
We are acting as financial advisor to the Special Committee of the Board of
Directors of the Company (the "Special Committee") in connection with the
proposed Transactions and will receive a fee for our services, including this
opinion, a significant portion of which is contingent upon the completion of the
proposed Transactions and the amount of consideration received by holders of the
Shares (other than the Dow Group) in the Transactions. In the ordinary course of
our business, we may actively trade the securities of the Company or members of
the Dow Group for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
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Special Committee of the Board of Directors
August 31, 1998
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Our opinion addresses only the fairness from a financial point of view to
the holders of the Shares (other than the members of the Dow Group) of the
consideration to be paid to them pursuant to the Merger Agreement and does not
address the Special Committee's underlying business decision to recommend the
Transactions.
This letter is for the benefit and use of the Special Committee in its
consideration of the Transactions, and may not be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose without our prior written consent (except as otherwise provided
in the engagement letter, dated as of June 11, 1998, between the Company and
us). We have been engaged and are acting solely as an advisor to the Special
Committee and not as an advisor to or agent of any other person. This opinion
does not constitute a recommendation to any stockholder with respect to whether
such holder should tender Shares pursuant to the Tender Offer or as to how such
holder should vote or otherwise act with respect to the Merger, and should not
be relied upon by any stockholder as such a recommendation.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein it is our opinion that, as of the date hereof,
the Cash Price to be received by the holders of Shares (other than members of
the Dow Group) in the Transactions pursuant to the Merger Agreement is fair to
such holders from a financial point of view.
Very truly yours,
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