Monsanto said to sweeten offer for Syngenta
Swiss firm likely to reject new bid
NEW YORK/LONDON: Syngenta AG rose the most in more than three months in Zurich trading yesterday as people familiar with the matter said US rival Monsanto Co has made an increased takeover offer, seeking to draw the Swiss agro-chemical producer to the negotiating table after its earlier approach was rejected.
The recent offer values Syngenta at about 470 Swiss francs per share in cash and stock, compared with the 449 francs the US firm offered earlier this year, the people said, asking not to be identified discussing a private situation.
That would translate to a market capitalisation of about 43.7 billion francs ($47 billion), data compiled by Bloomberg show.
The proposal contains a higher proportion of cash than the prior bid, which envisioned a split of 45% cash to 55% Monsanto shares, the people said.
Syngenta jumped as much as 8.6% to 388.3 francs at 10:06 a.m. in Zurich, the biggest gain since May 8, giving the company a market value equal to $38 billion.
The proposed break-up fee to be paid by Monsanto should antitrust regulators block the deal has also risen, increasing to $3 billion from the $2 billion previously promised, one of the people said.
Syngenta’s board is scheduled to meet soon to decide on how to respond to the increased offer, according to a person familiar with the matter.
“We expect Syngenta will reject this new offer as it is still well below what we think is their own price idea, of $62 billion or 650 francs a share,’’ Sanford C. Bernstein analyst Jeremy Redenius said in a note.
“However, we think this latest offer and the recent share price weakness means investors will step up the pressure in the coming weeks for Syngenta to negotiate with Monsanto.”
“Raising the bid goes against Monsanto’s pledge not to do so unless warranted by a review of Syngenta’s books,’’ said Matt Arnold, a St Louis-based analyst at Edward Jones & Co.
“There’s a little bit of dwindling price discipline here,” he said by phone on Monday. “You’d think this is probably the last increase they would do without having more information.”
Monsanto fell 4% to $93.55 in New York on Monday. The St Louis-based company’s new offer isn’t necessarily final and could change if Syngenta agrees to enter negotiations and open its books for due diligence, the person said.
So far the Basel-based company has refused to negotiate with Monsanto, arguing that it has stronger prospects on its own and that a cost-cutting reorganization is just starting to bear fruit.
Spokeswomen for Monsanto and Syngenta declined to comment.
A successful deal would turn Monsanto, led by chief executive Hugh Grant, into the largest global producer of both seeds and crop chemicals, widening its footprint in Europe significantly. Producers of agricultural chemicals are facing a slowdown in spending on their products, making consolidation more attractive.
The proposed merger would, however, almost certainly face significant opposition from regulators, politicians, and environmentalists on both sides of the Atlantic wary of allowing Monsanto more influence over agriculture.
Monsanto has been one of the strongest proponents of so-called genetically modified organisms, which are mostly banned in the European Union because of what activists say are uncertain environmental and health effects. The company and many scientists maintain the products are safe.
Monsanto’s efforts could be further complicated by the current turmoil in global financial markets, which has sent emerging- and developed-market stocks down precipitously since last week. The company’s shares have fallen 22% since the beginning of 2015.
Syngenta has suggested that it would be open to a higher bid that takes into account the risks of completion.