Reuter Labs of Haymarket, Va., and the Texize division of Morton Thiokol said last week that their merger deal is off.
Although both companies specialize in making products for trapping insects, neither was able to entice the other into a mutually acceptable takeover offer.
Texize, which makes the No-Pest strip, was going to buy Reuter Labs, which makes Beetle Bagger traps and sticky bars that snare houseflies and gnats. The companies signed a letter of intent last December.
But the final bait wasn't enough, according to Ted Reuter, half of the husband-and-wife team that started Reuter Labs with $17,000 a decade ago. "Two other companies are interested in us--that's all I can say," Reuter commented. "Texize's final offer wasn't what we wanted."
Neither Texize or Reuter disclosed a price, but Ted Reuter says his company is worth more than $10 million.
Texize conceded in a statement issued from its Greenville, S.C., headquarters that the market for biological insecticides "continues to offer very significant growth potential." But the company will go at it alone. "Each party has determined that its individual interest will be best served if they exploit this area separately," Doug West, senior vice president of marketing for Texize, said in the statement.
Reuter said his company needs the consumer marketing clout of a large corporation such as Texize, which also makes household cleaning products, including Fantastic Spray Cleaner and Spray and Wash Soil and Stain Remover. Texize had sales of $242 million last year.
"We've taken our company about as far as we can," said Reuter. "We'd need millions to really expand our market."
And because the No-Pest line it acquired from Shell has been so successful, industry analysts say Texize was looking to expand its product line outside of the market for man-made chemical pesticides into natural, biological insecticides that can kill off specific insects.
"Chemical pesticides are no longer effective weapons," explained Reuter, who left his job as bureau chief of a major radio network to set up Reuter Labs. "Insects have developed their own immunity to many chemical pesticides. At the same time, those same pesticides are killing off other insects and poisoning the environment. There are other alternatives."
Reuter first examined the use of natural insecticides when he was an environmental reporter more than a decade ago for Mutual News Network in Washington. He found that the U.S. Department of Agriculture had an extended bank of patents developed by its own scientists for natural substances found effective in controlling insect populations.
He wanted to start his own business and approached USDA about the license for the milky spore, a bacteria from the fungi family found effective in killing Japanese beetle grubs, whose appetite for grass roots is the target of warfare for many suburban lawnowners.
With his wife, Mary, who had worked in medical research, Reuter started Reuter Labs and registered the milky spore powder with the Environmental Protection Agency.
"We're environmentalists and wanted to do something to help," said Reuter, 43. "We're not far-out types that only subscribe to Mother Jones."
So they rented space in an office and warehouse in Manassas and Ted Reuter learned how to market cannisters of milky spores, now retailing at about $10 apiece, to local lawn and garden centers. Their company subsequently grew to a staff of 65 in two plants, and a research farm. They now market l5 products, all registered with EPA. Ten years ago, at the start of the natural foods and goods craze, Reuter said, there was no competition in biologicals. "We created our own market" by going door-to-door to local lawn and garden centers, he explained.
The company now has competition from huge consumer congolomerates such as Richardson-Vicks, which makes Bag-a-Bug traps for Japanese beetles and gypsy moths. Richardson's annual sales for those items were more than $5 million last year, analysts said.
But because the market for insecticides exists only when insects abound, the Reuters learned both the seasonal and regional nature of the pesticide business. The Japanese beetle's path of destruction, for example, stretches only as far west as the Mississippi. So the Reuters looked to the appropriate strain of spores--a vegetative cell that is like a lethal bomb once in the right insect's digestive tract--to kill grasshoppers in the Southwest and crickets in the South.
Spores are not the only effective natural weapons against insects. The Reuters also pray on the sexual appetite of the Japanese beetle. The Beetle Bagger trap lures males with the natural female beetle hormone, called a pheromone, as bait.
The pheromone technique also has proved effective in a Reuter Labs virus that kills gypsy moth larvae, which has been tested in Virginia and should be marketed within a year. Also about to be launched is a biological mosquito control made from fish protein, which only kills mosquitos--not fish, like chemical pesticides, Reuter said.