By: Andrew Morse
Syngenta AG rejected an unsolicited takeover offer valued at roughly $45 billion from U.S. rival Monsanto Co., saying the proposed deal undervalued the Swiss agrochemical giant.
Monsanto had proposed to buy Basel-based Syngenta for 449 Swiss francs ($486.20) per share, with roughly 45% of the payment in cash. The proposed price implies a deal value of roughly 41.7 billion francs based on the number of Syngenta shares outstanding.
In a statement, Monsanto said it sees "substantial synergies" from combining its seeds and traits with Syngenta's crop protection chemicals. Monsanto said it is confident a deal would receive regulatory clearance.
Syngenta said its board of directors unanimously rejected the proposal because it wasn't in the best interests of the company or its shareholders.
"The offer fundamentally undervalues Syngenta's prospects," Syngenta said in its statement Friday. The company added that Monsanto's proposal underestimated risks involved in executing the deal as well as the regulatory scrutiny it would generate. Amid speculation about a possible tie-up between the two giants last year, some industry watchers suggested potential tax benefits for Monsanto, if it were to move its tax home to Europe–a move called an inversion. The Obama administration has recently moved aggressively to limit such tax benefits.
Another potential road block for a deal would be anti-trust scrutiny in a number of countries where the two now compete.
The combination of Syngenta and St. Louis-based Monsanto would create an agricultural behemoth with combined annual revenue of roughly $31 billion. Syngenta specializes in chemicals used to protect crops and enhance yield, while Monsanto makes genetically modified crops, although the companies overlap in some areas.
The offer represents a roughly 35% premium to Syngenta's Thursday close of 332.70 francs. Syngenta shares surged more than 15% to 383 francs in early trading on the news.
Andreas Ruhlmann of IG Bank said the prospect of a rising U.S. dollar might allow Monsanto to sweeten its offer sometime later in the year.
"Should the (U.S. dollar) resume its uptrend and get back above parity–what might be the case by the end of the year, as we believe–we should not be surprised to hear about an even more attractive offer for Syngenta shares by Monsanto," Mr. Ruhlmann said in a note. He added in a conversation that a combination of the two companies would offer opportunities for both to cut costs.
A union, if one is pursued, would come as both companies struggle to right their businesses. Syngenta has reported profit drops in the past two years and announced a cost-cutting program in 2014 that is designed to save $1 billion annually by 2018.
Syngenta has also been the target of about 45 lawsuits over its genetically modified corn. Farmers in the U.S. have sued the company, saying that it moved to sell its biotech seeds before the corn was approved in China, which rejected shipments containing Syngenta's strain. Several companies, including grain exporter Cargill Inc., have also sued over the seeds, which are known by the name Viptera.
Syngenta has said the cases have no merit and that it has been transparent about the approval process. China subsequently approved the Syngenta corn.
Monsanto too is facing difficulties as a consumer backlash against genetically modified foods and criticism of Roundup, a weed killer its makes. Earlier this year, the World Health Organization said glyphosate, the chemical in Roundup, is a potential carcinogen.
Monsanto has rebutted the claims.
Originally Published: Market Watch