But the agreement could still be scuppered by the judge in a legal dispute involving Solutia, Monsanto and pharmaceutical company Pharmacia, now part of Pfizer.
Monsanto spun off Solutia in 1997, allegedly transferring debt obligations, legal, environmental clean-up and retirement costs of around $100 million (€83m) a year to the St Louis-based company. In court, Solutia has maintained that these liabilities were the reason for its decline into bankruptcy. Pharmacia's involvement stems from its purchase of Monsanto in 2000 and then spun it off a year and a half later.
Solutia and Monsanto now want to reformulate their relationship, freeing Solutia from its liabilities in return for Monsanto taking a greater than 50 per cent stake in the business. The parties want to submit the agreement to the bankruptcy court this summer.
However, responding to a complaint filed by an equity committee representing Solutia shareholders, the judge presiding in the bankruptcy court, Prudence Carter Beatty, has said she would not allow any such deal to proceed without the resolution of the ongoing litigation between Monsanto, Solutia and Pharmacia.
The deal on the table would see Solutia offer $250 million in new stock via a rights offering to unsecured creditors, who would then share the reorganised stock with Monsanto. Depending on the take-up of the deal by the creditors, Monsanto could end up with anything between 29.8 per cent and 52.5 per cent of Solutia. The proceeds would then allow secured creditors to be paid in full.
The equity committee alleges that because Monsanto cast Solutia adrift to free it from the liabilities, it was setting Solutia up to fail and so should not be considered as a creditor.
Solutia has activities spanning pharmaceuticals, film and glass products, nylon and specialty chemicals. Its Pharmaceutical Services Division (Solutia PSD), largely comprised of its Swiss subsidiaries CarboGen and AMCIS, has been unaffected by the bankruptcy petition, which only affects the US portions of the group.
Solutia PSD was established in 2000 following the acquisitions of CarboGen and AMCIS, and was bolstered in 2002 by the additions of Axio Research and Pharmaceutical Advisors. Carbogen provides process research, analytical services and active pharmaceutical ingredient (API) synthesis, while AMCIS focuses on process development and larger-scale API manufacture. Meanwhile, Axio specialises in data management, quality control and statistical analysis and Pharmaceutical Advisors brings drug development expertise to the business.