Syngenta rejects new Monsanto offer
US suitor promises $2bn break-up fee
LONDON: Syngenta AG, target of an unwanted $45 billion takeover approach by Monsanto Co, said yesterday that its US suitor has failed to convince it of the merits of a merger and was repeating the same indequate price with a flawed view of the execution risks.
“The only change in Monsanto’s proposal since the first offer tabled on April 18 is a wholly inadequate break-up fee of $2 billion,’’ the Basel, Switzerland-based maker of agrochemicals and seeds said in a statement.
Frustration is creeping into Syngenta’s demeanor, as the company faces the twin challenges of a detrimental effect on business of a prolonged pursuit and widespread expectations among investors of a higher offer.
Chief executive Mike Mack has trodden a careful path since the initial approach, acknowledging the need to do proper due diligence on Monsanto’s plan to create an agricultural-products powerhouse, while emphasising the prospects the company has going solo.
“It’s not the end of the takeover saga,” said Markus Mayer, an analyst at Baader Bank AG. “The second offer was not a big change — just a break-up fee. It shows that Monsanto is still interested.”
Monsanto is looking to jumpstart talks on combining its leading franchise for genetically modified seeds with the world’s largest maker of agricultural chemicals.
The break-up fee would be payable if Monsanto is unable to obtain global regulatory approvals by selling all overlapping businesses. It’s also looking to obtain a “limited set” of due diligence information to refine and quantify the upside of a merger.
“The statement suggesting a review of the offered price if due diligence confirms a higher valuation is adequate will put further pressure on Syngenta’s board to engage and offer this data,” Berenberg analyst John Klein said in a note.
“We still do not expect Monsanto to increase its offer substantially. The next step should be a formal — potentially hostile — offer.”
Such a move could well come before a scheduled earnings release on June 24, Klein said.
Syngenta rejected the 449 francs-ashare bid, with 45% payable in cash, saying it undervalued the company and didn’t sufficiently compensate for anti-trust risks.
“Syngenta would consider entering talks if Monsanto raises its offer and adds a multibillion-dollar termination fee in the ballpark of 10% of the purchase price,’’ people with knowledge of the situation said last week.
“The respective outside counsel of Syngenta and Monsanto met on three separate occasions, subsequent to our rejection letter, to discuss in good faith the regulatory challenges,” Syngenta said yesterday.
“These meetings have reinforced Syngenta’s assessment of the regulatory risks and Monsanto has made no attempt to seriously address these concerns. Monsanto continues to gloss over these fundamental transaction risks.”
Baader’s Mayer said Monsanto would have to sweeten its bid to at least the 500-franc mark — the analyst’s target price — or change the equity or cash components of the deal.
“It is disappointing that Syngenta has not engaged in substantive discussions about the many benefits of this combination,” Monsanto chairman and CEO Hugh Grant said in a statement.
While reiterating he’s committed to the deal, Grant said his preference “is to work with Syngenta at this stage,” urging board members to engage in the process.
Monsanto, based in St Louis, has pledged to sell Syngenta’s seed and genetically engineered traits as well as any overlapping crop chemicals to win regulatory approval. Chemicals that would be sold include Syngenta’s glyphosate and acetochlor herbicides.
It also suggested domiciling t he enlarged group in the UK, which would lessen the negative perception of lowering its tax burden via a move to Switzerland.
Syngenta said “it’s at the start of a significant upturn in innovation that will help margins climb to 24-26% by 2018. Monsanto’s bid represented a 43% premium to Syngenta’s share price at the close on April 30.