Executive Summary

PEARLE MAY BE TOO HARD TO DIGEST: MONSANTO TALKING DIVESTITURE WITH SEARLE about its 40% equity position in the Pearle Health Services chain of optical stores. According to Monsanto's share solicitation to Searle stockholders, Searle "has agreed to confer with Monsanto regarding the company's ownership of shares of common stock of Pearle Health Services, Inc., including the disposition thereof." Searle spun off a majority share of Pearle in September 1983. The company had announced in June of that year that its Pearle div. was for sale, but apparently later decided that a public offering would net a greater return. Searle raised approximately $90 mil. from that offer and an additional $6.1 mil. from a subsequent public offering of Pearle stock in 1984. Searle's 40% share of Pearle's 12.1 mil. outstanding shares is worth approximately $120 mil. at the stock's July 26 closing price of 24-3/4. Monsanto is offering $65 a share or approximately $2.8 bil. for Searle following the announcement of the friendly tender offer on July 18 ("The Pink Sheet" July 22, p. 3). The formal offer for all of Searle follows nearly a year of negotiation between the two companies during which Monsanto sought to acquire both Searle's pharmaceutical and consumer products businesses, but not its aspartame franchise. The solicitation offer notes that following initial contacts during the summer and fall of 1984, Monsanto and Searle "reviewed and negotiated various proposals and counter proposals" for nearly five months from November to late March when Searle called off negotiations with all prospective merger partners. *The tender offer points out that Searle Chairman Donald Rumsfeld will leave "following completion of the offer." The formal tender offer states that the Searle chief exec and Monsanto "have agreed to discuss Mr. Rumsfeld's role during the transition period." Searle said it informed Monsanto "that in accordance with its prior intentions, it plans to enter into written severance agreements with approximately 14 of the company's executive officers." Searle said it will structure these agreements to award no benefits to executives leaving the company during the first three months following consummation of the merger. These agreements with executives are "not expected to substantially exceed $15 mil.," Searle added.