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DuPont Seeds $7.7 Billion Deal

DuPont Co. has agreed to buy Pioneer Hi-Bred International Inc., the world's largest seed company, for about $7.7 billion in cash and stock in a move to expand its position in the life sciences sector, the company said Monday.

The chemical giant (DD) said it would pay $40 a share for the 80 percent of Pioneer (PHB) it does not already own. DuPont bought a 20 percent stake in Pioneer in 1997.

DuPont will pay cash for 45 percent of the Des Moines, Iowa-based company's shares and DuPont stock for the rest, the company said.

On Friday, DuPont said it was discussing "a possible business combination" with the corn and grain producer. The news sent Pioneer shares skyrocketing 40 percent, closing up 9 13/16 to 34 5/16

The deal represents about an 80 percent premium over the price Pioneer's stock was trading at early last week. DuPont shares fell 3/8 to 57 3/4 Friday before the news. The transaction is expected to close during the summer, the company said.

"We are creating an agricultural enterprise with $5 billion in annual sales, which will be focused on growth," said DuPont's chief executive Charles O. Holliday, Jr. in a statement.

DuPont said it expects dilution in cash earnings per share of about 1 percent in the first full year of combined operations. Fully diluted earnings will fall about 7 percent, the company said.

DuPont, with $25 billion in annual sales, is flush with cash after spinning off its Conoco oil subsidiary and is looking to bolster its so-called life sciences business. The company is moving away from cyclical sectors such as energy to broader fields such as life sciences to ensure steadier revenue streams and earnings.

Life sciences involves using biological advances and genetic science to produce better medicines, health and nutritional products, and agricultural goods, such as seeds resistant to disease and tolerant of pesticides.

Pioneer will become a subsidiary of DuPont, retain the Pioneer name and keep its headquarters in Des Moines, Iowa.

The deal would put DuPont in direct competition with Monsanto Co. (MCT), which bought the country's second-largest seed company, DeKalb Genetics Corp.

DuPont may not be done wheeling and dealing in the seed sector, however. The company has reportedly sent feelers out to Monsanto about acquiring that company. The Pioneer deal, though, could put such a potential merger on the rocks.

Written By Lisa J Ulmer, CBS MarketWatch