CONFIDENTIAL
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PRESENTATION TO THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS OF MYCOGEN CORPORATION
AUGUST 31, 1998
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
2
MYCOGEN CORPORATION
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MYCOGEN BUSINESS UNITS --
KEY DRIVERS OF GROWTH
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3
MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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OVERVIEW
---------------
BUSINESS - A DIVERSIFIED AGRIBUSINESS AND BIOTECHNOLOGY COMPANY THAT
DESCRIPTION DEVELOPS AND MARKETS SEED FOR IMPROVED CROP VARIETIES AND
--------------- PROVIDES CROP PROTECTION SERVICES
---------------
BUSINESS - SEED SEGMENT -- PRODUCES AND MARKETS SEED FOR MAJOR
SEGMENTS 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
- ▇▇▇▇▇▇ 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
- ▇.▇. ▇▇▇▇▇▇▇ -- JOINT VENTURE TO DEVELOP PEST AND
HERBICIDE RESISTANT COTTON
---------------
HEADQUARTERS - SAN DIEGO, CA
---------------
4
MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY DRIVERS OF GROWTH
---------------
TECHNOLOGY - BT TECHNOLOGY, A CORNERSTONE OF MYCOGEN'S
AND COMPETITIVE COMMERCIAL FUTURE, IS THE BEST PROVEN METHOD FOR
POSITION 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 ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇ 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
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY DRIVERS OF GROWTH
---------------
PRICING AND - TRAITS INTRODUCED INTO EXISTING SEED SALES ADD
MARGINS 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
---------------
ADOPTION RATES - 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
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY DRIVERS OF GROWTH
---------------
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
7
MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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COMPETITIVE CHARACTERISTICS OF RECENT MYCOGEN CORN HYBRIDS (YIELD IN BUSHELS
PER ACRE)
[GRAPH] [GRAPH]
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Data: Bt Corn Yield based on multiple independent Mycogen trials.
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MYCOGEN CORPORATION MYCOGEN BUSINESS UNITS
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KEY BUSINESS SEGMENTS
---------------
CONVENTIONAL - THE CONVENTIONAL SEED BUSINESS FORMS THE BASIS FOR
SEED CORN AND DISTRIBUTION OF MYCOGEN TRAITS AND PROVIDES
SOYBEAN 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 - MYCOGEN'S MARKET SHARE IN THE NORTH AMERICAN CORN
TRAITS 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 - IMPROVED SOYBEAN NUTRITIVE CONTENT WILL RESULT IN
TRAITS 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
9
MYCOGEN CORPORATION
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DCF ANALYSIS --
PROCESS AND METHODOLOGY
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10
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 Partner Presentations: presentations by Mycogen partners
specifically relating to joint ventures. These include AC Humko,
Verneuil Mycogen, ▇▇▇▇▇▇ 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 ▇▇▇▇▇ 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. CERTAIN SYNERGIES THAT WOULD BE
EXPECTED IN A COMBINATION WITH DOW, SUCH AS HEADCOUNT REDUCTIONS AND THE
EFFICIENT USE OF NET OPERATING LOSSES (NOL's) HAVE BEEN INCLUDED
11
MYCOGEN VALUATION: PROCESS AND METHODOLOGY
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FINANCIAL PROJECTION METHODOLOGY
----------------------------------- -----------------------------------------
10-YEAR PROJECTIONS DETAILED BASIS
----------------------------------- -----------------------------------------
-----------------------------------------
Target Crop Acreage - Includes demographic factors and
X regional analysis by crop
- Shifting planting patterns
-----------------------------------------
-----------------------------------------
Market Penetration of Genetically - Adoption value of Bt and output
Modified Seeds modified seed
X - Presence on ▇▇▇▇▇▇'▇ fields
-----------------------------------------
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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
Mycogen Product Sales Projections productivity and competitive
- advantage
-----------------------------------------
-----------------------------------------
- Costs reflect minimal additional COGS
and SGA for traits above those for
Fixed and Variable Costs and Taxes conventional seed
+ - R&D investment accelerated to ensure
successful timing of products
-----------------------------------------
-----------------------------------------
Cash Flow Impact (-W.I. - CapEx + Dep.)- Based on current inventory and accounts
= payable/receivable trends
Mycogen Product Free Cash Flow - Additional plant expenditure is
dependent on sales levels and existing
capacity
-----------------------------------------
-----------------------------------
VALUATION METHODOLOGY
-----------------------------------
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MYCOGEN VALUATION: PROCESS AND METHODOLOGY
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VALUATION METHODOLOGY
----------------- --------------- -------------------
TERMINAL VALUE: DISCOUNT RATE PERPETUITY VALUE:
EBIT MULTIPLES FREE CASH
GROWTH
----------------- --------------- -------------------
[GRAPH]
13
MYCOGEN VALUATION: PROCESS AND METHODOLOGY
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IMPLICATION OF PROJECTED GROWTH RATE - NORTH AMERICA EXAMPLE
--------
---- ------ IMPLIED ------
CROP GROWTH EBIT MARKET
---- RATE MULTIPLE SHARE*
------ -------- ------
13.6%
3.4%
Corn Input 5.0 - 6.5% 3.3 - 4.7x [BAR GRAPH] [BAR GRAPH]
------------------------
1997 2007
3.9%
Soybean Output 5.0 - 6.5% 2.5 - 3.4x 0% [BAR GRAPH]
------------------------
1997 2007
10%
Disease Resistance 8.0 - 10.0% 1.5 - 3.1x 0% [BAR GRAPH]
(Share of Mycogen ------------------------
Market) 1997 2007
--------------------------
*Assumes that total market remains constant and revenues / customer are fixed.
14
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.
- 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 20.
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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 INCLUDED 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, ▇▇▇▇▇▇▇▇ 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
16
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
NORTH AMERICAN SEEDS
SOYBEAN TRAITS
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------------------------------------------------------------------------------
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
Units (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
Units (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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GENETIC 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
------------------------------------------------------------------------------
Total Sunflower Genetic Royalties $85 $100 $125 $150 $1,100 $1,500 $2,400 $3,300 $5,400 $7,200
------------------------------------------------------------------------------
------------------------------------------------------------------------------
ASSUMPTIONS
Bt CYST
Market opportunity = 46,000,000 bags
Soybean yields improve 15%
Royalty $5.00/bag
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
NORTH AMERICAN SEEDS
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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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
-----------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------
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TOTAL R&D DOLLARS BY CROP
Corn 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
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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 VALUATION: PROCESS AND METHODOLOGY
--------------------------------------------------------------------------------
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 $27.7 $27.7 $27.7 $27.7
PV of Terminal Multiple 39.8 41.4 43.1 44.9
------ ------ ------ ------
Enterprise Value $67.5 $69.1 $70.8 $72.6
Less: Net Debt 0.0 0.0 0.0 0.0
------ ------ ------ ------
EQUITY VALUE $67.5 $69.1 $70.8 $72.6
IMPLIED PERPETUITY GROWTH 5.0% 5.5% 6.0% 6.5%
% VALUE FROM TERMINAL MULT. 59.0% 59.9% 60.9% 61.8%
22.0% PV of Free Cash Flow $24.6 $24.6 $24.6 $24.6
PV of Terminal Multiple 29.8 30.8 31.9 33.1
------ ------ ------ ------
Enterprise Value $54.3 $55.4 $56.5 $57.7
Less: Net Debt 0.0 0.0 0.0 0.0
------ ------ ------ ------
EQUITY VALUE $54.3 $55.4 $56.5 $57.7
IMPLIED PERPETUITY GROWTH 5.0% 5.5% 6.0% 6.5%
% VALUE FROM TERMINAL MULT. 54.8% 55.7% 56.5% 57.4%
24.0% PV of Free Cash Flow $21.9 $21.9 $21.9 $21.9
PV of Terminal Multiple 22.6 23.4 24.1 24.9
------ ------ ------ ------
Enterprise Value $44.5 $45.2 $46.0 $46.8
Less: Net Debt 0.0 0.0 0.0 0.0
------ ------ ------ ------
EQUITY VALUE $44.5 $45.2 $46.0 $46.8
IMPLIED PERPETUITY GROWTH 5.0% 5.5% 6.0% 6.5%
% VALUE FROM TERMINAL MULT. 50.9% 51.7% 52.5% 53.3%
--------------------------------------------------------------------
SELECTED EQUITY VALUE RANGE $45 -- $73
--------------------------------------------------------------------
20
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 ▇▇▇▇▇▇ X
Sunflower Head Moth X
Sunflower Seed Weevil X
Soybean Cyst X X
-------------------------------------------------------------------------------------------------------------------------------
21
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 ▇▇▇▇▇
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
▇▇▇▇▇ ▇▇▇▇ 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/Mycotoxin X X
Sunflower Sclerotinia X X
Verticilian X
-------------------------------------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------------------------------------
JV/Partner Royalties
VMO Conventional Europe
Early Traits Europe
Output Traits Europe
Cotton Conventional X X
Bud/Bollworm X X Australia
▇▇▇▇ Weevil X X and
Lygus X Greece
Oilseed/Humko -- X X
Oilseed/DAS -- X
Rice Stem Borer Japan
Plant ▇▇▇▇▇▇ 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
-----------------------------------------------------------
23
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
-----------------------------------
RESULTS OF DISCOUNTED CASH
FLOW VALUATION
-----------------------------------
24
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
----------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF VALUATION
------------------------------------------------------------------------------------------------------------
BUSINESS CROP REGION DISCOUNT GROWTH RATE
RATE /EBIT MULTIPLE
------------------------------------------------------------------------------------------------------------
Biopesticides -- -- 11.0% - 14.0% 6 - 10
SoilServ -- -- 11.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇. ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇.▇% - ▇▇.▇% ▇ - ▇▇
▇▇▇▇▇▇ 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% 8 - 12
Brazil 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% 8 - 12
Argentina 12.0% - 14.0% ▇ - ▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇▇▇▇▇ ▇▇.▇% - ▇▇.▇% ▇ - ▇▇
▇▇▇▇▇▇ 12.0% - 14.0% 8 - 12
Early / Input Traits
Corn N. America 20.0% - 24.0% 5.0% - 8.5%
Argentina 20.0% - 24.0% 0.0% - 6.5%
Brazil 20.0% - 24.0% 5.0% - 6.5%
Soybeans N. America 20.0% - 24.0% 5.0% - 6.5%
Brazil 20.0% - 24.0% 5.0% - 6.5%
Sunflower N. America 20.0% - 24.0% 5.0% - 6.5%
Argentina 20.0% - 24.0% 0.0% - 6.5%
All N. America 20.0% - 24.0% 5.0% - 6.5%
Argentina 20.0% - 24.0% 0.0% - 6.5%
Brazil 20.0% - 24.0% 5.0% - 6.5%
Output Traits
Corn N. America 25.0% - 30.0% 5.0% - 6.5%
Argentina 25.0% - 30.0% 5.0% - 6.5%
Brazil 25.0% - 30.0% 5.0% - 6.5%
Soybean N. America 25.0% - 30.0% 5.0% - 6.5%
Brazil 25.0% - 30.0% 5.0% - 6.5%
Sunflower N. America 25.0% - 30.0% 5.0% - 6.5%
Argentina 25.0% - 30.0% 5.0% - 6.5%
All N. America 25.0% - 30.0% 5.0% - 6.5%
Argentina 25.0% - 30.0% 5.0% - 6.5%
Brazil 25.0% - 30.0% 5.0% - 6.5%
Disease Resistance
N. America 31.0% - 50.0% 8.0% - 10.0%
Argentina 31.0% - 50.0% 8.0% - 10.0%
Brazil 31.0% - 50.0% 8.0% - 10.0%
All Other Crops 45.0% - $50.0% 8.0% - 10.0%
Rice (Japan Tobacco) 31.0% - $50.0% 8.0% - 10.0%
JV/Royalties
VMO Conventional Seed 12.0% - 14.0% 6 - 10
Early / Input Traits 20.0% - 24.0% 5.0% - 6.5%
Output Traits 25.0% - 30.0% 5.0% - 6.5%
Disease-Res. 31.0% - 30.0% 8.0% - 10.0%
Total VMO
▇▇ ▇▇▇▇▇▇▇ Cotton 12.0% - 14.0% ▇ - ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12.0% - 14.0% 6 - 10
Argentina 12.0% - 14.0% 6 - 10
Total Oilseed
DAS Canada Canola 20.0% - 24.0% 8 - 12
PHB Bt Royalties 20.0% - 20.0%
Other Partner Royalties 20.0% - 24.0% 1.0% - 25%
Other Pests / Crops 31.0% - $ 0.0% 5.0% - 6.3%
Miscellaneous (1)
Synergy with Third Party (common Illinois Foundation Seed)
Cost Savings
NOL-Current (est)
NOL-Projected (est)
Monsanto Settlement (80%-100% Probability)
35% in Vermont (at cost)
Oral Immunity (est.)
Bt Blocking (50% Probability) 20.0% - 24.0%
Corporate A&D 22.0% - 14.0%
Litigation Expense (Net of Interest) 12.8% - 14.0%
Net Debt
Total
Shares Outstand (MM) 36.26
Options Outstand (MM) 3.59
Final Outstanding (Treasury Method, MM)
Value/Share
------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
VALUATION GEOGRAPHIC SUB- VALUE/
LO HI AVERAGE TOTAL TOTAL TOTALS SHARE
----------------------------------------------------------------------------------------
$3 - $4 $4 $4 $4 $0.09 - $0.12
$28 - $40 $34 $34 $34 $0.72 - $1.02
$94 - $210 $152
$37 - $56 $47
$101 - $175 $138
($10)- $18 $4
$0 - $0 $0
$9 - $15 $12
$3 - $9 $6
($4)- ($4) ($4)
$14 - $22 $18
$97 - $254 $176 $2.54 - $6.53
$49 - $79 $64 $1.29 - $2.02
$101 - $175 $138 $2.65 - $4.50
Total Conventional Seed $378
$72 - $126 $99
$1 - $5 $3
$29 - $53 $41
$45 - $73 $59
($0)- $1 $0
($1)- ($1) ($1)
($1)- $2 $1
$115 - $198 $156 $3.01 - $5.08
($0)- $7 $3 $-0.01 - $0.18
$29 - $54 $41 $0.75 - $1.39
Total Early Traits $201
$7 - $17 $12
($2)- ($2) ($2)
$5 - $11 $8
$144 - $266 $205
$7 - $14 $11
$4 - $8 $6
$13 - $23 $18
$156 - $291 $223 $4.08 - $7.47
$11 - $21 $16 $0.28 - $0.55
$14 - $27 $20 $0.35 - $0.70
Total Output Traits $260
($2)- $0 ($1) ($1) $-0.05 - $0.00
($0)- $2 $1 $1 $0.00 - $0.04
($0)- ($0) ($0) ($0) $-0.01 - $-0.01
Total Disease Resistance (Current) ($1)
$119 - $154 $136 $136 $3.10 - $3.96
($2)- $2 ($0) ($0) $-0.06 - $0.04
Total Disease Resistance (Other) $136
$7 - $10 $9 $0.18 - $0.27
($1)- ($2) ($2) $-0.04 - $-0.04
$2 - $4 $3 $0.06 - $0.11
($0)- $0 $0 $0.00 - $0.01
$8 $14 $11 $11
$39 - $86 $73 $73 $73 $1.54 - $2.22
$0 - $0 $0 $0 $0.00 - $0.00
$2 - $3 $2 $2 $0.06 - $0.07
$0 - $0 $3
$13 - $21 $17 $17 $17 $0.34 - $0.54
$35 $38 $36 $36 $36 $0.90 - $0.97
$14 - $21 $17 $17 $17 $0.35 - $0.54
$20 - $104 $62 $62 $62 $0.53 - $2.67
$29 $45 $37 $37 $0.75 - $1.15
$9 $13 $11 $11 $0.23 - $0.34
$80 - $80 $80 $80 $2.09 - $2.06
$30 - $30 $30 $30 $0.77 - $0.76
$82 - $103 $92 $92 $2.15 - $2.64
$9 - $9 $9 $9 $0.25 - $0.24
$20 - $30 $30 $30 $0.52 - $0.77
$111 - $131 $121 $121 $2.91 - $3.36
($80)- ($77) ($79) ($79) $-2.10 - $-1.99
($37)- ($34) ($36) ($36) $-0.97 - $-0.92
($75)- ($75) ($75) ($75) $-1.96 - $-1.93
$220
--------- --------- --------- --------- --------
$1,847 $1,841 $1,444 $1,482 $1,482
38.27 38.93 38.40 38.75
$27.37 $47.29 $37.32 $37.82
----------------------------------------------------------------------------------------
(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
25
MYCOGEN VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
-------------------------------------------------------------------------------
VALUATION OF BUSINESSES (AVERAGE OF PROJECTED RANGE)
[GRAPH]
26
MYCOGEN VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
-------------------------------------------------------------------------------
SENSITIVITY OF VALUATION TO CONVENTIONAL SEED MARKET SHARE
BASE CASE SENSITIVITY ANALYSIS
--------- --------------------
CONVENTIONAL NEW CONVENTIONAL NEW CONVENTIONAL
SEED MARKET CONTRIBUTION 2007 SEED SHARE @ 2007 SEED SHARE @
1997 2007 TO VALUE 75% OF FORECAST 125% OF FORECAST
-------------- -------------- ----------------------- ----------------------
KEY BUSINESSES CHANGE CHANGE
--------------
CONVENTIONAL SEEDS
Corn N. America 3.4% 13.6% $2.46 - $5.40 $0.98 - $2.87 (60.2%) $3.93 - $7.92 59.8%
Brazil 11.0% 29.0% $2.65 - $4.50 $2.34 - $3.91 (11.7%) $2.97 - $5.09 12.1%
EARLY TRAITS
Corn N. America 3.4% 13.6% $1.88 - $3.25 $1.60 - $2.76 (14.9%) $2.16 - $3.72 14.9%
Soybean N. America 1.8% 7.8% $1.16 - $1.86 $0.86 - $1.36 (25.9%) $1.22 - $1.96 5.2%
OUTPUT TRAITS
Soybean N. America 1.8% 7.8% $3.77 - $6.83 $3.55 - $6.40 (5.8%) $3.99 - $7.24 5.8%
PERCENTAGE OF TOTAL VALUE (1) 45.3% 40.6% 48.7%
TOTAL VALUATION/SHARE $27.37 - $47.29 $23.98 - $41.51 $30.25 - $52.38
(1) Total valuation includes 35 additional business units. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO.
----------------------------------------------------------------------------------------------------------------
27
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
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%
28
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD
--------------------------------------------------------------------------------
PRODUCT ATTRITION PROFILE FOR PROBABILITY-WEIGHTED VALUATION METHOD
--------------------------------------------------------------------------------
- THE PROBABILITY-WEIGHTED METHOD INCORPORATES ESTIMATED PROBABILITIES OF KEY
EVENTS IN THE COMMERCIALIZATION OF NEW PRODUCTS TO WEIGHT THE ASSOCIATED
REVENUES AND EXPENSES
- BASED ON INPUT FROM KEY SCIENTIFIC PERSONNEL AT MYCOGEN, THE FOLLOWING
PROBABILITIES HAVE BEEN USED IN THIS VALUATION
--------------------------------------------------------------------------------
[GRAPH] [GRAPH] [GRAPH]
COST ($/MM) T-5 T-4 T-3 T-2 T-1 T=0
----- ----- ----- ----- ------ (LAUNCH)
ACTIVITIES $2.00 $0.5 $0.0
Gene characterization $1.0 $0.5
Expression/Screening $0.5 $0.1
Optimization $0.6 $0.6
Event Breeding
29
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
-------------------------------------------------------------------------------
SUMMARY OF VALUATION
--------------------------------------------------------------------------------------------------------------------
Discount Growth Rate Valuations Geographic Sub-
Business Crop Region Rate /EBIT Multiple Lo Hi Average Total Totals
--------------------------------------------------------------------------------------------------------------------
BIO-PESTICIDES - - 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 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 37 - $ 55 $ 46
Brazil 11.0%-14.0% 8 - 10 $ 112 - $ 178 $ ▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ (11)- $ 9 $ (1)
Brazil 11.0%-14.0% 8 - 10 $ 0 - $ 0 $ ▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 9 - $ 14 $ ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 3 - $ 8 $ ▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ (4)- $ (4) $ (4)
Argentina 11.0%-14.0% 8 - 10 $ 15 - $ 22 $ ▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 101 - $ 221 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 34 - $ 81 $ 68
Brazil 11.0%-14.0% 8 - 10 $ 112 - $ 178 $ 145
TOTAL CONVENTIONAL SEED $ ▇▇▇
▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 63 - $ 150 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 1 - $ 6 $ 4
Brazil 11.0%-14.0% 5.0% - 6.5% $ 22 - $ 56 $ ▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 87 - $ 189 $ ▇▇▇
▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ (0)- $ 1 $ ▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ (2)- $ (0) $ (1)
Argentina 11.0%-14.0% 5.0% - 6.5% $ (0)- $ 4 $ ▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 149 - $ 339 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 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 $ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 6 - $ 23 $ ▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ (1)- $ (0) $ (1)
Brazil 11.0%-14.0% 5.0% - 6.5% $ 2 - $ 9 $ ▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 110 - $ 276 $ ▇▇▇
▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 8 - $ 16 $ ▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 3 - $ 7 $ 5
Argentina 11.0%-14.0% 5.0% - 6.5% $ 8 - $ 18 $ ▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 120 - $ 306 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 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 $ 136
- Rice (Japan Tobacoo) 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% 5.0% - 10.0% $ (0)- $ 4 $ 2
TOTAL VMO $ 8 $ 21 $ 14 $ ▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 11.0%-14.0% 6 - 12 $ 51 - $ 93 $ 72 $ 72 $ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 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 11.0%-14.0% 6 - 10 $ 19 - $ 40 $ 29 $ 29 $ 29
PHB BT ROYALTIES 11.0%-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)
Synergy with Third Party (including Illinois Foundation Seed) $ 28 - $ 53 $ 40 $ 40
Cost Savings $ 9 - $ 13 $ 11 $ 11
NOL-Current (est) $ 80 - $ 80 $ 80 $ 80
NOL-Projects (est) $ 35 - $ 35 $ 35 $ 35
Monsanto Settlement (80%-100% Probability) $ 82 - $ 103 $ 92 $ 92
35% in Vermont (at cost) $ 9 - $ 9 $ 9 $ 9
Oral Immunity $ 20 - $ 30 $ 30 $ 30
Bt Blocking (50% probability) 11.0%-14.0% $ 175 - $ 203 $ 189 $ 189
Corporate R&D 12.0%-14.0% $ (124)- $ (117) $ (120) $ (120)
Litigation Expense (Net of Interest) 11.0%-14.0% $ (37)- $ (35) $ (34) $ (34)
Net Debt $ (75)- $ (75) $ (75) $ (75) $ (75)
$ 330
------ ------ ------ ------ ------
TOTAL $1,663 $2,146 $1,748 $1,755 $1,755
Shares Outstand (MM) 36.26
Options Outstand (MM) 3.59
Final Outstanding (Treasury Method, MM) 38.29 39.86 38.88 38.89
Value Share $27.77 $54.92 $44.76 $46.13
--------------------------------------------------------------------------------------------------------------------
(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
30
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
IMPACT OF RECENT SEED OPERATION RESULTS
- UPON COMPLETION OF THE FY 1998 SETTLEMENT PROCESS, THE NORTH AMERICAN SEED
BUSINESS HAS POSTED RESULTS IN LINE WITH PROJECTIONS FOR ALL BUT THE CORN
SEED OPERATIONS
- Corn seed is expected to post a decline in volume of approximately 10%
relative to FY 1997
- Corn prices also have shown a less robust increase than expected
- As a result, seed sales are expected to be 24% below 1998 plan and 8%
below 3Q 1998 forecasts
- THE OBSERVED DECLINE IN VOLUME AND UNIT SALES PRICE IS DUE TO AGGRESSIVE
DISCOUNTING BY DEKALB AND PIONEER. SUCH DISCOUNTING TO GAIN MARKET SHARE
IS NOT A SUSTAINABLE LONG-TERM STRATEGY. HOWEVER, THE RESULTING LOSSES IN
MARKET SHARE MAY ADVERSELY IMPACT MYCOGEN'S LONG-TERM GROWTH PROJECTIONS
- IN ARGENTINA, BECAUSE THE FISCAL YEAR EXTENDS THROUGH JANUARY, ONLY
PRELIMINARY RESULTS ARE AVAILABLE. THESE RESULTS SUGGEST THAT SALES WILL
BE $4 MM SHORT (ABOUT 10% BELOW PROJECTIONS) AND GROSS PROFITS WILL BE 30%
BELOW PROJECTED LEVELS OF $12 MM
- ASSUMING THAT THE RECENT MARKET SHARE EROSION IMPACTS PROJECTED MARKET
SHARE GROWTH IN A CONSTANT FASHION, TOTAL VALUE WOULD BE REDUCED BY
APPROXIMATELY $40 MM OR APPROXIMATELY $1 PER MYCOGEN SHARE
Current Range Reduced Growth Range
------------- --------------------
Variable Discount Rate $27.37 - $47.29 $26.22 - $45.44
Probability Weighted Method $27.82 - $54.97 $26.83 - $53.28
31
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
-------------------------------------------------------------------------------
SUMMARY OF VALUATION
BUSINESSES CROPS REGIONS DISCOUNT GROWTH RATE VALUATION GEOGRAPHIC SUB- VALUE/
RATE /EBIT MULTIPLE LO HI AVERAGE TOTAL TOTALS SHARE
------------------------------------------------------------------------------------------------------------------------------------
Biopesticides - - 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 $0.73 - $1.02
Conven. Seed
Corn N. America 12.0% - 14.0% 8 - 12 $42 - $156 $109
Argentina 12.0% - 14.0% 8 - 12 $37 - $58 $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 $5
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 $63 - $198 $130 $1.65 - $5.09
Argentina 12.0% - 14.0% 8 - 12 $49 - $79 $64 $1.29 - $2.02
Brazil 12.0% - 14.0% 8 - 12 $101 - $175 $138 $2.66 - $4.50
Total Conventional Seed $333
Early / Input Traits
Corn N. America 20.0% - 24.0% 5.0% - 6.5% $66 - $116 $91
Argentina 20.0% - 24.0% 0.0% - 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% $45 - $73 $59
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% 0.0% - 6.5% ($1) - $2 $1
All N. America 20.0% - 24.0% 5.0% - 6.5% $109 - $187 $143 $2.84 - $4.81
Argentina 20.0% - 24.0% 5.0% - 6.5% ($0) - $7 $3 $-0.01 - $0.18
Brazil 20.0% - 24.0% 5.0% - 6.5% $29 - $54 $41 $0.75 - $1.39
Total Early Traits $192
Output Traits
Corn N. America 25.0% - 30.0% 5.0% - 6.5% $6 - $15 $10
Argentina 25.0% - 30.0% 5.0% - 6.5% ($2) - ($2) ($2)
Brazil 25.0% - 30.0% 5.0% - 6.5% $5 - $11 $8
Soybeans 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% $155 - $289 $222 $4.05 - $7.42
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 $258
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 $3.11 - $3.96
Rice (Japan Tobacco) 31.0% - 50.0% 8.0% - 10.0% ($2) - $2 ($0) ($0) $-0.06 - $0.04
Total Disease Resistance (Other) $136
JV / Royalties
VMO Conventional Seed 12.0% - 14.0% 6 - 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 $0.04 - $0.11
Disease-Res. 31.0% - 50.0% 8.0% - 10.0% ($0) - $0 $0 $0.00 - $0.01
Total VMO $8 - $14 $11 $11
▇▇ ▇▇▇▇▇▇▇ Cotton 12.0% - 14.0% 8 - 12 $39 - $86 $73 $73 $73 $1.55 - $2.22
??????? Oilseed N. America 12.0% - 14.0% 6 - 10 $0 - $0 $0 $0 $0.00 - $0.00
Argentina 12.0% - 14.0% 6 - 10 $2 - $3 $2 $2 $0.06 - $0.07
Total Oilseed $0 - $0 $3
DAS Canada Canola 20.0% - 24.0% 8 - 12 $13 - $21 $17 $17 $17 $0.34 - $0.54
PHD B? Royalties 20.0% - 24.0% $35 - $38 $36 $36 $36 $0.91 - $0.97
Other Partner Royalties 20.0% - 24.0% 1.0% - 2.5% $14 - $21 $17 $17 $17 $0.35 - $0.54
Other P??? / Crops 31.0% - 50.0% 5.0% - 6.5% $20 - $104 $62 $62 $62 $0.53 - $2.68
Miscellaneous*
Synergy with Third Party (???????? Illinois Productions S???) $29 $45 $37 $37 $0.75 - $1.15
Cost Savings $9 $13 $11 $11 $0.23 - $0.34
NOL-Current (est) $80 - $80 $80 $80 $2.10 - $2.06
NOL-Projected (est) $26 - $26 $26 $26 $0.67 - $0.66
Monsanto Settlement (???-100% Probability $82 - $103 $92 $92 $2.15 - $2.64
35% in Ver???? (at cost) $9 - $9 $9 $9 $0.25 - $0.24
Oral Imm???????? (est) $20 - $30 $30 $30 $0.52 - $0.77
?? Blocking (50% Probability) 20.0% - 24.0% $111 - $131 $121 $121 $2.92 - $3.36
Corporate R&D 12.0% - 14.0% ($80) - ($77) ($78) ($78) $-2.09 - $-1.98
Litigation Expenses (Net of Interest) 12.0% - 14.0% ($37) - ($36) ($36) ($36) $-0.98 - $-0.92
Net Debt ($75) - ($75) ($75) ($75) $-1.96 - $-1.93
$217
------ ------ ------ ------ ------
Total $1,??2 $1,7?? $1,??7 $1,392 $1,??3
Shares Outstand. (MM) 36.26
Options Outstand. (MM) 3.??
Final Outstanding (Treasury Method, MM) 38.20 38.90 36.66 38.68
Value/Share $26.23 $48.44 $36.?? $34.?2
------------------------------------------------------------------------------------------------------------------------------------
[ILLEGIBLE]
32
MYCOGEN CORPORATION VALUATION: PROBABILITY - WEIGHTED METHOD DCF ANALYSIS
-------------------------------------------------------------------------------
SUMMARY OF VALUATION
--------------------------------------------------------------------------------------------------------------------
Discount Growth Rate Valuation Geographic Sub-
Business Crop Region Rate /EBIT Multiple Lo Hi Average Total Totals
--------------------------------------------------------------------------------------------------------------------
BIO-PESTICIDES - - 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 $ 63 - $ 135 $ ▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 37 - $ 55 $ 46
Brazil 11.0%-14.0% 8 - 10 $ 112 - $ 178 $ ▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ (10)- $ 9 $ (1)
Brazil 11.0%-14.0% 8 - 10 $ 0 - $ 0 $ ▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 9 - $ 14 $ ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 3 - $ 8 $ ▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ (4)- $ (4) $ (4)
Argentina 11.0%-14.0% 8 - 10 $ 15 - $ 22 $ ▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 69 - $ 171 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 8 - 10 $ 34 - $ 81 $ 68
Brazil 11.0%-14.0% 8 - 10 $ 112 - $ 178 $ 145
TOTAL CONVENTIONAL SEED $ ▇▇▇
▇▇▇▇▇ / ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 57 - $ 137 $ ▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 1 - $ 6 $ 4
Brazil 11.0%-14.0% 5.0% - 6.5% $ 22 - $ 34 $ ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 87 - $ 189 $ ▇▇▇
▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ (0)- $ 1 $ ▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ (2)- $ (0) $ (1)
Argentina 11.0%-14.0% 5.0% - 6.5% $ (0)- $ 4 $ ▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 143 - $ 326 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 1 - $ 10 $ 4
Brazil 11.0%-14.0% 5.0% - 6.5% $ 22 - $ 57 $ 40
TOTAL EARLY TRAITS $ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 5 - $ 20 $ ▇▇
▇▇▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ (1)- $ (0) $ (1)
Brazil 11.0%-14.0% 5.0% - 6.5% $ 2 - $ 9 $ ▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 110 - $ 276 $ ▇▇▇
▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 6 - $ 16 $ ▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 3 - $ 7 $ 5
Argentina 11.0%-14.0% 5.0% - 6.5% $ 8 - $ 18 $ ▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ 11.0%-14.0% 5.0% - 6.5% $ 118 - $ 303 $ ▇▇▇
▇▇▇▇▇▇▇▇▇ 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 $ 241
DISEASE RESISTANCE
N. America 11.0%-14.0% 5.0% - 10.0% $ (3)- $ 10 $ 4 $ 4
Argentina 11.0%-14.0% 5.0% - 10.0% $ 1 - $ 10 $ 6 $ 6
Brazil 11.0%-14.0% 5.0% - 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% 5.0% - 10.0% $ 0 - $ 4 $ 2
TOTAL VMO $ 8 $ 21 $ 14 $ ▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 11.0%-14.0% 6 - 12 $ 51 - $ 93 $ 72 $ 72 $ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 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% 6 - 10 $ 19 - $ 40 $ 29 $ 29 $ 29
PHB BT 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)
Syngergy with Third Party (including Illinois Foundation Seed) $ 28 - $ 53 $ 40 $ 40
Cost Savings $ 9 - $ 13 $ 11 $ 11
NOL-Current (est) $ 80 - $ 80 $ 80 $ 80
NOL-Projected (est) $ 36 - $ 36 $ 36 $ 36
Monsanto Settlement (80%-100% Probability) $ 82 - $ 103 $ 92 $ 92
35% in Vermont (at cost) $ 9 - $ 9 $ 9 $ 9
Oral Immunity $ 20 - $ 30 $ 30 $ 30
Bt Blocking (50% probability) 11.0%-14.0% $ 175 - $ 203 $ 189 $ 189
Corporate R&D 12.0%-14.0% $ (124)- $ (116) $ (120) $ (120)
Litigation Expense (Net of Interest) 11.0%-14.0% $ (37)- $ (35) $ (36) $ (36)
Net Debt $ (75)- $ (75) $ (75) $ (75) $ (75)
$ 332
------ ------ ------ ------ ------
TOTAL $1,826 $2,000 $1,689 $1,764 $1,764
Shares Outstand. (MM) 36.26
Options Outstand. (MM) 3.59
FINAL OUTSTANDING (TREASURY METHOD, MM) 38.24 39.04 38.96 38.86
Value Share $26.83 $53.29 $41.48 $43.83
--------------------------------------------------------------------------------------------------------------------
(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
33
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
-----------------------------------
COMPARABLE ANALYSIS
-----------------------------------
34
MYCOGEN CORPORATION COMPARABLE ANALYSIS
-------------------------------------------------------------------------------
COMPARABLE SEED COMPANIES
- MYCOGEN'S VALUE IS A COMBINATION OF ITS CONVENTIONAL SEED BUSINESS AND THE
VALUE DERIVED FROM ACTIVITIES IN THE AGROBIOTECH AREA
- 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 smaller 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
- 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇ of biotech tools and intellectual property.
In addition, Mycogen has gained exclusive access to certain highly
attractive new growth platforms such as ▇▇▇▇▇▇▇▇ technology for insect
and disease resistance and oral immunity through transgenic plants
- 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 $733 MILLION
35
MYCOGEN CORPORATION COMPARABLE ANALYSIS
-------------------------------------------------------------------------------
COMPARABLE COMPANY ACQUISITIONS
- THE RECENT ACQUISITION OF ▇▇▇▇▇▇▇'▇ INTERNATIONAL SEED BUSINESS CONTRADICTS
THE NOTION THAT LOSS-MAKING MYCOGEN DIFFERS FROM OTHER COMPARABLE
ACQUISITIONS SINCE OTHER COMPANIES ARE ALL PROFITABLE. ▇▇▇▇▇▇▇'▇
LOSS-MAKING SEED BUSINESS (~$-20 MILLION IN 1997) WAS RECENTLY ACQUIRED BY
MONSANTO FOR $1.4 BILLION
- 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
- 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)
- 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
36
MYCOGEN CORPORATION COMPARABLE ANALYSIS
-------------------------------------------------------------------------------
PREMIUM ANALYSIS - MONSANTO/DEKALB GENETICS
PREMIUM TO PRIOR PRICE
--------------------------------------------------
ANNC. DATE SHARES(3) % TOTAL CUMM % PRICE/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
-------------------------------------------------------------------------------
37
MYCOGEN CORPORATION COMPARABLE ANALYSIS
-------------------------------------------------------------------------------
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
38
MYCOGEN CORPORATION COMPARABLE ANALYSIS
-------------------------------------------------------------------------------
PREMIUM ANALYSIS FOR BIOTECH ACQUISITIONS BY MAJOR SHAREHOLDERS (1)
Seller Closing Price/
Pre-▇▇▇. Acquisition Premium
▇▇▇. Deal Per Share ------------------------------------
▇▇▇. 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 $20.50 $18.25 $17.00
Implied Share Price Based on Median for Biotech Transactions $29.82 $29.85 $24.73
Implied Share Price Based on Mean for Biotech Transactions $31.27 $28.01 $24.74
----------------------------------------------------------------------------------------------------------------------------------
------------------------------------
(1) Source: Securities Data Company
Note: Unless noted, days referred to are calendar days.
39
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
-----------------------------------
CONCLUSIONS
-----------------------------------
40
MYCOGEN CORPORATION CONCLUSIONS
-------------------------------------------------------------------------------
SUMMARY OF VALUATION RESULTS
LOW MEAN HIGH
--- ---- ----
DISCOUNTED CASH FLOW
Variable Discount Rate (Reduced Growth) $26.22 $45.44
Probability-Weighted (Reduced Growth) $26.83 $53.28
COMPARABLE TRADING COMPANIES(1)
Premium of 10%, Implied Multiple: 5.4x $30.22
Premium of 30%, Implied Multiple: 5.7x $31.93
Premium of 50%, Implied Multiple: 6.0x $33.64
COMPARABLE ACQUISITIONS(2)
Range with and without DKB(3) $33.24 $38.85
BIOTECH SQUEEZE OUT
(Comparable Range of Premiums)
Based on Price 1 Day Prior $27.66 $36.34
Based on Price 60 Days Prior $24.22 $25.26
(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.
41
MYCOGEN CONCLUSIONS
-------------------------------------------------------------------------------
GRAPHICAL SUMMARY OF VALUATION RESULTS
METHOD $20.00 $30.00 $40.00 $50.00 $60.00
------ | | | | |
------------------------------------------------------
- DISCOUNTED CASH FLOW
- Variable Discount Rate (Reduced Growth) $26.22 ----------------------------$45.44
- Probability-Weighted (Reduced Growth) $26.83 --------------------------------------$53.28
- COMPARABLE TRADING COMPANIES
(Premiums only apply to PHB and AgroBiotech)
- Premium 10% --
- Premium 30% --
- Premium 50% --
- COMPARABLE ACQUISITIONS
- DKB, PHB, Calgene (49.9%) $33.24 ----------$38.85
(with and without DPL)
- BIOTECH SQUEEZE OUT
(Range of Biotech Premiums)
- Based on Price 1 Day Prior $27.66 -------------$36.34
- Based on Price 60 Days Prior $24.22 -- $25.26
42
MYCOGEN CONCLUSIONS
-------------------------------------------------------------------------------
IMPLIED AGGREGATE DOW PURCHASE PRICE FOR MYCOGEN
VALUATION APPROACH $10.00 $20.00 $30.00 $40.00 $50.00 $60.00
------------------ | | | | | |
-----------------------------------------------------------------
- VARIABLE DISCOUNT RATE (REDUCED GROWTH) $26.22 ------------------------$45.44
- PROBABILITY-WEIGHTED (REDUCED GROWTH) $26.83 ---------------------------------$53.28
- COMPARABLE TRADING/ACQUISITIONS $31.06 ------ $38.85
- BIOTECH SQUEEZE OUT $24.22 ------------- $36.34
IMPLIED AGGREGATE PURCHASE
--------------------------
(REMAINING BLOCK PURCHASED AT ABOVE VALUATION)
- VARIABLE DISCOUNT RATE (REDUCED GROWTH) $19.78 ------- $25.89
- PROBABILITY-WEIGHTED (REDUCED GROWTH) $19.98 ---------$28.37
- COMPARABLE TRADING/ACQUISITIONS $21.17 ---- $23.60
- BIOTECH SQUEEZE OUT $19.15 ------ $23.00
MYCO [$21.31]
43
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
-----------------------------------
APPENDIX
A. SUMMARY FINANCIALS
B. COMPARABLE ANALYSES
-----------------------------------
44
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
-----------------------------------
SUMMARY FINANCIALS
-----------------------------------
45
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
--------------------------------------------------------------------------------
CORPORATE INCOME STATEMENT PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
REVENUES $256.5 $298.5 $355.9 $418.8 $492.9 $577.8 $705.0 $1,061.5 $1,503.8 $2,034.0
SoilSer v $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 $273.4 $330.3 $402.1 $486.0 $607.9 $961.1 $1,398.9 $1,923.5
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 $155.8 $192.0 $240.3 $299.1 $392.2 $700.0 $1,094.9 $1,569.8
SG&A $68.6 $81.6 $88.9 $95.7 $105.0 $114.1 $127.9 $147.0 $173.0 $204.9
R&D $32.5 $46.0 $59.0 $71.0 $91.0 $98.0 $105.0 $119.8 $164.6 $215.5
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 $60.9 $67.0 $72.9 $83.2 $116.9 $161.2 $211.6
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
Corporate $0.0 $0.5 $2.6 $6.5 $19.6 $20.7 $18.0 $0.0 $0.0 $0.0
EBITDA $7.9 ($4.5) $7.9 $25.3 $44.3 $87.0 $159.4 $433.1 $756.9 $1,149.5
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 ($10.9) $0.5 $16.9 $34.8 $76.4 $147.2 $418.8 $740.4 $1,130.4
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) ($15.9) ($4.3) $14.2 $37.2 $88.4 $167.8 $448.7 $777.4 $1,178.6
LITIGATION EXPENSES ($20.0) ($15.0) ($10.0) ($5.0) ($2.0) ($2.0) ($2.0)
INTEREST EXP./REV. ($2.8) ($7.6) ($11.8) ($15.9) ($18.6) ($17.9) ($15.6) ($7.2) $10.2 $36.6
PRE-TAX INCOME (TOTAL) ($24.9) ($38.5) ($26.1) ($6.7) $16.6 $68.4 $150.2 $441.5 $787.7 $1,215.2
TAXES (@41%) 0.0 0.0 0.0 0.0 (6.8) (28.1) (61.6) (181.0) (322.9) (498.2)
NOL Utilization 0.0 0.0 0.0 0.0 6.8 28.1 4.6 0.0 0.0 0.0
NET INCOME (24.9) (38.5) (26.1) (6.7) 16.6 68.4 93.2 260.5 464.7 717.0
E.P.S. (38.27MM SHARES) ($0.65) ($1.01) ($0.68) ($0.17) $0.43 $1.79 $2.44 $6.81 $12.14 $18.73
46
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
--------------------------------------------------------------------------------
CORPORATE BALANCE SHEET PROJECTIONS ($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 $2.2 $408.2 $1,005.7
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 $614.2 $1,087.8 $1,815.9
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
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 $132.0 $186.7 $240.8 $257.9 $223.0 $194.6 $0.7 $0.0 $0.0
A/P & Accruals $19.3 $24.2 $27.1 $30.1 $34.3 $39.6 $46.4 $56.0 $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 $196.9 $254.6 $311.6 $332.9 $303.3 $281.8 $97.4 $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) ($250.9) ($277.0) ($283.7) ($267.2) ($198.7) ($105.5) $155.0 $619.7 $1,336.7
STOCKHOLDERS EQUITY $132.3 $93.8 $67.7 $61.0 $77.5 $146.0 $239.2 $499.7 $964.5 $1,681.4
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
TOTAL S.H. EQUITY AND LIAB. $282.5 $307.8 $339.4 $389.7 $427.6 $466.4 $538.1 $614.2 $1,087.8 $1,815.9
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
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) ($38.5) ($26.1) ($6.7) $16.6 $68.4 $150.2 $441.5 $787.7 $1,215.2
Less: Taxes Paid $0.0 $0.0 $0.0 $0.0 ($0.0) ($0.0) ($57.0) ($181.0) ($322.9) ($498.2)
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) ($58.9) ($54.7) ($54.0) ($17.1) $34.9 $28.3 $194.0 $406.6 $647.5
47
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
--------------------------------------------------------------------------------
CORPORATE CASH FLOW STATEMENT ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Income ($24.9) ($38.5) ($26.1) ($6.7) $16.6 $68.4 $93.2 $260.5 $464.7 $717.0
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) (51.0) (41.4) (23.8) (0.3) 52.1 70.6 225.5 432.0 677.8
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) (58.9) (54.7) (54.0) (17.1) 34.9 28.3 194.0 406.6 647.5
Debt Issuance (Paydown)
ADVANCES FROM DAS - - - - - - - - - -
SHORT-TERM BORROWINGS 68.0 58.9 54.7 54.0 17.1 (34.9) (28.3) (194.0) (0.7) -
Equity Issuance - - - - - - - - - -
CASH FLOW (FINANCING) 68.0 58.9 54.7 54.0 17.1 (34.9) (28.3) (194.0) (0.7) -
NET INC./DEC. IN CASH $0.0 ($0.0) $0.0 ($0.0) $0.0 $0.0 $0.0 $0.0 $406.0 $647.5
Cash & Equivalents BOY $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $408.2
Cash & Equivalents EOY $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $2.2 $408.2 $1,055.7
48
MYCOGEN CORPORATION VALUATION: VARIABLE DISCOUNT RATE DCF ANALYSIS
------------------------------------------------------------------------------
CORPORATE NET OPERATING LOSS CARRYFORWARDS / DEBT SCHEDULE ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
NOL SCHEDULE
------------
Start New NOL Carry (1) $10.2 $ 26.0 $ 36.7 $ 39.5 $ 39.5 $ 32.7 $ 4.6 $ 0.0 $ 0.0 $ 0.0
Taxes Due $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ (6.8) $(28.1) $(61.6) $(181.0) $(322.9) $(498.2)
Total New NOL Utilized $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 6.8 $ 28.1 $ 4.6 $ 0.0 $ 0.0 $ 0.0
Balance Current NOL Carry $10.2 $ 26.0 $ 36.7 $ 39.5 $ 32.7 $ 4.6 $ 0.0 $ 0.0 $ 0.0 $ 0.0
New NOL YTD $10.2 $ 15.8 $ 10.7 $ 2.7 $ 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 73.1 132.0 186.7 240.8 257.9 223.0 194.6 0.7 --
Addn. Short-Term Borrow. 68.0 58.9 54.7 54.0 17.1 -- -- -- -- --
Debt Paid Down -- -- -- -- -- (34.9) (28.3) (194.0) (0.7) --
----- ------ ------ ------ ------ ------ ------ ------- ------- -------
EOY Short-term Borrowings $73.1 $132.0 $186.7 $240.8 $257.9 $223.0 $194.6 $ 0.7 $ 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.
49
CURRENT as of: Estimated Present Value of NOLs
7/21/98 Option 1
Option 1 FY 1999 FY 2000 Fy 2001 Fy 2002
------------------------------------------------------------------------
Estimated NOL at 8/31/98 (federal) 228,001,545 18,732,548 18,732,548 18,732,548 18,732,548
Estimated Annual Limitation(1) 53,521,566
Estimated R&D Credit 2,071,000
Estimated State NOLs 2,052,014 2,052,014 2,052,014 2,052,014
Discount rate used for PV Calculation 6.06%
April 1998 federal tax exempt 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
------------- DAS 75,000,000
382 Valuation 1,059,832,996 Exercised 11,899,244
2002/1099 option income - exercises thru above date 12,109,587 To be Exercised 48,777,960
2002/1099 option income - est. exercises at buyout 58,737,120 -----------
Restricted Stock taxable inc - vested thru above date 2,074,838 Estimated contributions 135,677,204
Restricted Stock inc. est - not vested thru above date 1,080,000
Estimated 8/31/98 Other Oper. Loss 30,000,000
Estimated NOL from 8/31/97 124,000,000
-------------
Estimated NOL 228,001,545
FY 2003 FY 2004 Present Value
--------------------------------------------------
Estimated NOL at 8/31/98 4,870,348 - $ 68,446,166
Estimated Annual Limitation(1)
Estimated R&D Credit 2,071,000 $ 1,543,017.32
Estimated State NOLs 2,052,014 2,052,014 $10,070,633.87
--------------
PV= $ 80
WHEN ITALICIZED AMOUNT FOR FY2003
TURNS NEGATIVE, THE FORMULAS
NEED TO BE MODIFIED.
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.
50
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 $416.6 $484.5 $554.3 $641.3 $780.1 $929.9 $1,111.5
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 $328.2 $393.8 $462.6 $548.0 $685.3 $833.3 $1,012.7
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 $189.8 $231.9 $275.7 $328.6 $418.5 $521.0 $647.4
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 $46.0 $59.0 $71.0 $91.0 $98.0 $105.0 $105.0 $105.0 $123.5
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 $54.7 $60.6 $69.4 $85.7 $101.4 $120.7
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
Corporate $0.0 $5.2 $11.0 $20.2 $34.1 $35.1 $33.3 $16.8 $1.1 $0.0
EBITDA $3.9 ($4.5) $7.4 $23.1 $35.9 $63.6 $95.7 $166.5 $242.6 $319.0
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) ($11.1) $0.2 $15.2 $27.2 $53.9 $85.6 $155.3 $229.6 $303.8
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) ($16.1) ($4.6) $13.7 $30.6 $65.7 $102.0 $177.9 $254.5 $334.1
LITIGATION EXPENSES ($20.0) ($15.0) ($10.0) ($5.0) ($2.0) ($2.0)
INTEREST EXP./REV ($3.0) ($7.9) ($12.2) ($16.3) ($19.1) ($19.6) ($19.0) ($17.7) ($13.5) ($5.7)
PRE-TAX INCOME (TOTAL) ($29.5) ($38.9) ($26.8) ($7.6) $9.5 $44.0 $83.0 $160.3 $241.0 $328.4
TAXES (@41%) 0.0 0.0 0.0 0.0 (3.9) (18.0) (34.0) (65.7) (98.8) (134.7)
NOL Utilization 0.0 0.0 0.0 0.0 3.9 18.0 20.2 0.0 0.0 0.0
NET INCOME (29.5) (38.9) (26.8) (7.6) 9.5 44.0 69.2 94.5 142.2 193.8
E.P.S.(38.29MM SHARES) ($0.77) ($1.02) ($0.70) ($0.20) $0.25 $1.15 $1.81 $2.47 $3.71 $5.06
51
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
------------------------------------------------------------------------------
CORPORATE BALANCE SHEET PROJECTIONS ($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 $ 2.2
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 $ 138.1 $ 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 $ 229.7
Intangibles $ 30.3 $ 27.7 $ 25.1 $ 22.4 $ 19.8 $ 17.1 $ 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 $ 758.0
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
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 $ 77.3 $ 135.6 $ 193.7 $ 243.9 $ 267.3 $ 259.7 $ 251.2 $223.5 $ 139.7 $ 15.7
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 $ 200.7 $ 261.8 $ 315.0 $ 342.5 $ 340.2 $ 338.6 $320.4 $ 246.2 $ 133.3
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) $(256.0) $(282.8) $(290.3) $(280.8) $(236.8) $(167.6) $(73.1) $ 69.1 $ 262.8
STOCKHOLDERS EQUITY $ 127.7 $ 88.8 $ 61.9 $ 54.4 $ 63.9 $ 107.9 $ 177.1 $271.6 $ 413.8 $ 607.6
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
TOTAL S.H. EQUITY AND LIAB. $ 282.3 $ 306.6 $ 340.9 $ 386.5 $ 423.5 $ 465.2 $ 532.8 $609.2 $ 677.1 $ 758.0
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
------- ------- ------- ------- ------- ------- ------- ------ ------- -------
NET WORKING CAPITAL $ 94.3 $ 113.3 $ 136.0 $ 161.4 $ 187.8 $ 214.8 $ 249.6 $299.8 $ 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) $ (38.9) $ (26.8) $ (7.6) $ 9.5 $ 44.0 $ 83.0 $160.3 $ 241.0 $ 328.4
Less: Taxes Paid $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ (0.0) $ 0.0 $ (13.8) $(65.7) $ (98.8) $(134.7)
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) $ (58.3) $ (58.1) $ (50.2) $ (23.3) $ 7.6 $ 8.5 $ 27.7 $ 83.8 $ 124.0
52
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) ($38.9) ($26.8) ($7.6) $9.5 $44.0 $69.2 $94.5 $142.2 $193.8
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) (51.3) (42.3) (25.2) (8.1) 26.7 44.5 56.4 105.9 150.6
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) (58.3) (58.1) (50.2) (23.3) 7.6 8.5 27.7 83.8 124.0
Debt Issuance (Paydown)
ADVANCES FROM DAS - - - - - - - - - -
SHORT-TERM BORROWINGS 72.2 58.3 58.1 50.2 23.3 (7.6) (8.5) (27.7) (83.8) (124.0)
Equity Issuance - - - - - - - - - -
CASH FLOW (FINANCING) 72.2 58.3 58.1 50.2 23.3 (7.6) (8.5) (27.7) (83.8) (124.0)
NET INC./DEC. IN CASH ($0.0) ($0.0) $0.0 ($0.0) $0.0 ($0.0) ($0.0) ($0.0) $0.0 $0.0
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 $2.2
53
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
--------------------------------------------------------------------------------
CORPORATE NET OPERATING LOSS CARRYFORWARDS / DEBT SCHEDULE ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NOL SCHEDULE
Start New NOL Carry(1) $12.1 $28.1 $39.1 $42.2 $42.2 $38.3 $20.2 $0.0 $0.0 $0.0
Taxes Due $0.0 $0.0 $0.0 $0.0 ($3.9) ($18.0) ($34.0) ($65.7) ($98.8) ($134.7)
Total New NOL Utilized $0.0 $0.0 $0.0 $0.0 $3.9 $18.0 $20.2 $0.0 $0.0 $0.0
Balance Current NOL Carry $12.1 $28.1 $39.1 $42.2 $38.3 $20.2 $0.0 $0.0 $0.0 $0.0
New NOL YTD $12.1 $16.0 $11.0 $3.1 $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 77.3 135.6 193.7 243.9 267.3 259.7 251.2 223.5 139.7
Addn. Short-Term Borrow. 72.2 58.3 58.1 50.2 23.2 - - - - -
Debt Paid Down - - - - - (7.6) (8.5) (27.7) (83.8) (124.0)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
BOY Short-term Borrowings $77.3 $135.6 $193.7 $243.9 $267.3 $259.7 $251.2 $223.5 $139.7 $15.7
(1) Excluded existing NOL's existing prior to 1998. Prior NOL's valued
separately subject to existing utilization limitations
(2) NOL's generated in 1998-2007 period valued assuming accelerated utilization
due to consolidation with larger entity
54
MYCOGEN CORPORATION VALUATION: PROBABILITY-WEIGHTED METHOD DCF ANALYSIS
-------------------------------------------------------------------------------------------------------------------------------
CORPORATE FINANCIAL RATIO PROJECTIONS ($MM)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
------ ------ ------ ------ ------ ------- ------ ------ ------- ------
COGS/SALES 58.5% 59.7% 57.1% 54.6% 51.8% 49.2% 47.5% 45.0% 42.8% 40.6%
SG&A/SALES 27.2% 27.8% 25.4% 23.1% 21.5% 20.2% 19.4% 18.3% 18.2% 17.9%
R&D/SALES 14.5% 15.7% 16.8% 17.1% 18.7% 17.3% 16.0% 13.1% 11.0% 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% -1.9% 2.1% 6.5% 9.3% 14.6% 18.3% 24.8% 29.2% 31.8%
EBITDA/SALES 1.5% -1.5% 2.1% 5.6% 7.4% 11.2% 14.6% 20.7% 25.4% 27.9%
EBIT/SALES -0.9% -3.8% 0.1% 3.7% 5.6% 9.5% 13.0% 19.3% 24.0% 26.6%
NET INC./SALES -11.7% -13.3% -7.7% -1.8% 1.9% 7.8% 10.5% 11.8% 14.9% 17.0%
WORKING CAP/SALES 37.4% 38.6% 38.8% 38.9% 38.5% 37.9% 38.0% 37.2% 36.5% 35.6%
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% 1.2% 1.3% 1.2% 1.2% 1.2%
PPE/SALES 41.6% 36.8% 34.0% 33.5% 30.4% 28.3% 28.6% 25.8% 22.7% 20.1%
DEBT/ASSETS 38.8% 61.3% 75.9% 81.1% 79.5% 69.2% 57.4% 44.2% 24.7% 2.5%
COVERAGE (EBIT/INTEREST) -0.8x -1.4x 0.0x 0.9x 1.4x 2.7x 4.5x 8.8x 17.0x 53.2x
DEBT/TOTAL CAP. 38.8% 61.3% 75.9% 81.1% 79.5% 69.2% 57.4% 44.2% 24.7% 2.5%
55
MYCOGEN CORPORATION
-------------------------------------------------------------------------------
-----------------------------------
COMPARABLE ANALYSIS
-----------------------------------
56
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 8/26/98 VALUE VALUE 1997 1998E GTH. EPS GTH.(1) BOOK
------------- ------- ------- -------- ----- ----- -------- ----------- ------
(in $) (in $ MM) (in $ MM) (a) (a) (%) (a) (a)
Mycogen 21.75 823.6 904.9 NM NM 22.5 NM 4.1
Pioneer Hi-Bred 36.88 8,908.3 8,710.3 37.5 32.2 15.0 2.14 6.4
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) 11.13 371.9 370.5 NM 46.4 40.0 1.16 4.6
--------------------------------------------------------------
Mean 72.6 60.1 27.5 2.32 10.1
Median 87.0 59.2 27.5 2.27 8.8
High 93.4 89.8 40.0 3.59 18.3
Low 37.5 32.2 15.0 1.16 4.6
--------------------------------------------------------------
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.
------------- ----- ----- ----- ----- ------ ------ ------ ------ ---- ---- ----- ----- ---------
(a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (%)
Mycogen 4.29 4.15 3.53 3.03 NM NM NM NM NM NM NM NM 9.9
Pioneer Hi-Bred 4.88 4.73 4.49 4.20 19.3 18.9 16.8 14.3 24.0 23.4 20.1 16.8 (2.3)
Dekalb Genetics(2) 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) 1.34 1.34 1.45 0.72 32.3 32.3 32.4 12.6 62.6 62.6 42.9 14.2 (0.4)
---------------------------------------------------------------------------------------------------------------------------------
Mean 5.64 5.20 4.72 3.87 36.9 41.3 31.8 21.2 51.0 60.1 39.8 25.3 2.6
Median 5.50 5.08 5.15 4.71 38.8 44.4 32.9 18.4 50.7 67.0 40.1 20.5 1.6
High 10.32 9.33 7.13 5.33 50.8 57.5 44.6 35.4 62.6 83.0 58.8 46.1 9.5
Low 1.34 1.34 1.45 0.72 19.3 18.9 16.8 12.6 24.0 23.4 20.1 14.2 (2.3)
---------------------------------------------------------------------------------------------------------------------------------
OPERATING STATISTICS
TOTAL REVENUES
------------------------------ EBITDA MARGIN EBIT MARGIN
LTM 97/96 % 98E/97 % ------------------------------- ----------------------------------
COMPANY ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ 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 I/B/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 at 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 estimated per analyst
projections of D&A margins.
57
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
----- ----- ----- ----- ----- ----- ----- -----
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
----- ----- ----- ----- ----- ----- ----- -----
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
----- ----- ----- ----- ----- ----- ----- -----
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
----- ----- ----- ----- ----- ----- ----- -----
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 accounts 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
58
MYCOGEN CORPORATION COMPARABLE ANALYSIS
-------------------------------------------------------------------------------
SELECTED SEED COMPARABLE COMPANIES ANALYSIS FOR FISCAL YEAR 1994-1997
EBITDA Margin EBIT Margin Net Income Margin
------------------------------- ---------------------------------- --------------------------------
1994 1995 1996 1997 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%) (8.8%) (14.1%) (19.6%) (8.5%)
Pioneer Hi-Bred 25.4% 23.1% 24.6% 25.3% 20.4% 18.3% 20.2% 20.3% 12.4% 11.9% 13.0% 13.6%
Dekalb Genetics 10.2% 11.1% 11.4% 13.5% 6.6% 7.6% 8.5% 10.5% 3.5% 3.0% 4.4% 6.4%
Delta & Pine Land 19.3% 22.5% 20.4% 20.3% 16.1% 19.4% 17.7% 17.5% 9.7% 11.1% 10.5% 10.7%
Agribiotech (1) NM (27.0%) (9.0%) (0.7%) NM (29.9%) (11.2%) (2.4%) NM (29.6%) (12.8%) (4.1%)
-------------------------------------------------------------------------------------------------------------------
Mean 18.3% 7.4% 11.8% 14.6% 14.4% 3.8% 8.8% 11.5% 8.6% (0.9%) 3.8% 6.7%
Median 19.3% 16.8% 15.9% 16.9% 16.1% 12.9% 13.1% 14.0% 9.7% 7.0% 7.4% 8.6%
-------------------------------------------------------------------------------------------------------------------
R&D/Total Revenues
------------------------------
1994 1995 1996 1997
---- ---- ---- ----
Mycogen 16.1% 18.7% 15.2% 11.4%
Pioneer Hi-Bred 7.7% 8.5% 7.9% 8.2%
Dekalb Genetics 13.8% 13.3% 12.3% 12.7%
Delta & Pine Land 6.8% 6.7% 6.4% 7.4%
Agribiotech (1) NM 1.2% 0.2% 1.8%
-----------------------------------------
Mean 9.4% 7.4% 6.7% 7.5%
Median 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 Days Payable Net Debt/Book Equity
------------------- ------------------- ------------------- -----------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ 1997 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ 1997 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ 1997 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Mycogen 86 89 70 70 182 181 143 162 22 36 33 60 (30.2%) (13.5%) (36.7%) 19.5%
Pioneer Hi-Bred 39 38 44 52 213 239 189 205 48 33 44 40 (6.1%) 4.9% (4.8%) 1.7%
Dekalb Genetics(2)(▇) ▇▇ ▇▇ ▇▇ ▇▇ ▇▇▇ 235 177 217 14 15 24 24 102.1% 98.8% 36.6% 60.8%
Delta & Pine Land 11 19 157 187 144 130 153 133 28 40 55 59 31.8% 11.0% 48.3% 39.9%
Agribiotech (1) NM 54 104 95 NM 145 136 170 NM 56 82 77 (45.4%) (9.3%) 29.9% 56.4%
-----------------------------------------------------------------------------------------------------------
Mean 34 44 88 94 192 187 164 181 30 36 51 50 20.6% 26.4% 27.5% 39.7%
Median 39 46 76 74 213 190 165 188 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
calculations
(2) Data not available to separate trade receivables from note receivables
(3) Accounts Payable includes only trade accounts payable
59
MYCOGEN CORPORATION COMPARABLE ANALYSIS
--------------------------------------------------------------------------------
SELECTED COMPARABLE ACQUISITION / VALUATION MULTIPLES
ADJUSTED PURCHASE PRICE/
----------------------------------
IMPLIED VALUE ADJUSTED LTM LTM LTM
TARGET ACQUIRER CLOSE DATE OF EQUITY PURCHASE PRICE SALES EBITDA EBIT
------------------------------ ----------------- ---------- ------------- -------------- ------- ------ -------
SEED COMPANIES
--------------
DELTA & PINE LAND MONSANTO PENDING $1,832.5 $1,906.7 9.87 X 69.8 X 89.6 X
Sunseeds AgrEvo 10/6/97 NA NA 2.20 X 13.1 X 18.0 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
Holden's Foundation Seeds Monsanto 9/4/97 NA $975.0 (1) 21.67 X NA X NA X
Asgrow Corn & Seed Monsanto 2/4/97 NA $240.0 1.41 X NA ▇▇
▇▇▇▇▇▇ Seeds Mycogen Corp. 10/1/96 $40.9 $40.9 1.10 X NA NA
Agracetus (▇.▇. ▇▇▇▇▇) Monsanto 5/21/96 $150.0 $150.0 NA NA NA
Sure Grow Delta & Pine Land 5/21/96 $70.0 $78.9 3.47 17.5 19.1
▇▇▇▇▇▇ Hertz Seed (Monsanto) Delta & Pine Land 2/5/96 NA NA NA NA ▇▇
▇▇▇▇▇▇▇ - ▇▇▇▇▇▇ & Seed Delta & Pine Land 5/3/94 NA NA NA NA NA
IMPLIED VALUE OF EQUITY/
-------------------------
NET BOOK
INCOME VALUE
------------ -----------
SEED COMPANIES
--------------
DELTA & PINE LAND NM X 25.1 X
Sunseeds NA X NA X
PIONEER HI-BRED (16.6% STAKE) 33.9 X 8.9 X
Holden's Foundation Seeds NA X NA X
Asgrow Corn & Seed NA ▇▇
▇▇▇▇▇▇ Seeds NA NA
Agracetus (▇.▇. ▇▇▇▇▇) NA NA
Sure Grow 29.9 3.2
▇▇▇▇▇▇ Hertz Seed (Monsanto) NA ▇▇
▇▇▇▇▇▇▇ - ▇▇▇▇▇▇ & Seed NA NA
------------------
(1) Final terms not disclosed; purchase price assumes maximum expected price.
60
MYCOGEN CORPORATION COMPARABLE ANALYSIS
--------------------------------------------------------------------------------
SELECTED COMPARABLE ACQUISITION / VALUATION MULTIPLES (CONT'D)
ADJUSTED PURCHASE PRICE/
------------------------------
IMPLIED VALUE ADJUSTED LTM LTM LTM
TARGET ACQUIRER CLOSE DATE OF EQUITY PURCHASE PRICE SALES EBITDA EBIT
------------------------------ --------------- ---------- ------------- -------------- ------- ------ -------
BIOTECH COMPANIES (MAJORITY STAKES)
--------------
Monsanto American Home Pending(1) $35,563.7 $39,134.7 5.09 X 36.4 X 70.8 X
Products
Plant Breeding Int'l (Unilever) Monsanto Pending $523.0 $523.0 19.96 (2) NA NA
DEKALB GENETICS MONSANTO PENDING $3,771.2(3) $3,881.2(3) 8.28 X 61.2 X 79.7 X
Zeneca Mogen 5/13/97 $73.6 $73.6 12.80 X NM X NM X
Bionova (ELM) DNA Plant Tech. 9/27/96 $63.4 $67.9 NM X NM X NM X
Plant Genetic Systems AgrEvo 8/30/9 $733.0 $733.0 NM X NM X NM X
CALGENE INC. MONSANTO 4/1/96 $299.8(3) $268.0(3) 4.80 X NM X NM X
(49.9% SHARES)
Mycogen DowElanco 3/8/96 $444.7(3) $358.1(3) 2.90 X NM X NM X
(9.5mm shares)
United Agriseeds Inc. Mycogen 2/28/96 $72.4 $72.4 ▇▇ ▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇/▇▇/▇▇ ▇▇ ▇▇ ▇▇ ▇▇ ▇▇
IMPLIED VALUE OF EQUITY/
-------------------------
NET BOOK
INCOME VALUE
------------ -----------
BIOTECH COMPANIES (MAJORITY STAKES)
--------------
Monsanto NM X 8.1 X
Plant Breeding Int'l (Unilever) NA NA
DEKALB GENETICS NM X 16.9 X
Zeneca NM X NA
Bionova (ELM) NM X NA
Plant Genetic Systems NM X NA
CALGENE INC. NM X 3.1 X
(49.9% SHARES)
Mycogen NM X 2.3 X
(9.5mm shares)
United Agriseeds Inc. NA NA
Lubrizol 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
61
