Discussions are said to be at an advanced stage and an announcement is expected this week, possibly as early as today. If the merger goes ahead, the two groups are likely to combine their pharmaceutical businesses and sell Monsanto's agriculture unit in a no-premium merger of equals.
An alliance between the two groups would create a company with revenues of $15.54bn (pounds 9.71bn) and a combined market capitalisation of about $53.21bn. If the deal goes ahead, Fred Hassan, P&U's chief executive, is expected to take up the post of CEO of the enlarged group. Robert Shapiro, Monsanto's chief, would become chairman.
The merger would be the latest round of consolidation in the rapidly restructuring pharmaceuticals sector. Novartis, the Swiss life science group and AstraZeneca, its Anglo-Swedish rival, recently agreed to merge their agrobusinesses. And US Pfizer and American Home Products are currently embroiled in a bitter takeover fight for Warner-Lambert.
Monsanto's GD Searle pharmaceuticals unit makes Celebrex, the arthritis drug, and Ambien, a sleeping aid. P&Usells Xalatan, a leading glaucoma drug, Detrol, the incontinence drug and Rogaine, the hair-growth product.