Drug Companies Call Off Merger

American Home Products and Monsanto Co. on Tuesday called off their $33 billion merger in a surprise move scuttling the biggest pending pharmaceuticals deal.

In a two-paragraph press release, AHP (AHP) said the boards of both companies had concluded that the deal was "not in the best interest" of shareholders. But the Madison, N.J.-based maker of pharmaceuticals and health-care products otherwise declined to say why the deal collapsed. Monsanto (MTC), headquartered in St. Louis, couldn't immediately be reached for comment.

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Analysts, however, speculated that the merger foundered over differences in corporate governance.

The chief executives of the two companies were known for sharply differing styles, and the cultures of each corporation reflected those differences. Under the merger agreement, the two CEOs were to share that title at the combined company, while the board would have been expanded to 22 members, divided equally between AHP and Monsanto. Analysts viewed that management structure as unwieldy.

Monsanto stock has plunged earlier in the month amid rumors that the merger was in trouble, but the companies declined to comment.

The deal, valued at $33 billion when it was announced in June, would have led to the creation of a global powerhouse in the so-called life sciences sector. The combined entity would have been a leader in the production of pharmaceuticals, consumer goods and genetically engineered crops, with annual sales of $23 billion.

Drug companies have been racing to combine their budgets for a better chance of coming up with new blockbuster drugs.

The merged company would have been a major player in a wide variety of areas prescription drugs, agriculture, nutrition and biotechnology.

American Home is best known for its drug and health products, including Advil pain reliever and Robitussin cough syrup. Monsanto makes the artificial sweetener Nutrasweet and is heavily involved in agricultural biotechnology.

Written By Jeffry Bartash