Syngenta Rejects $45 Billion Takeover Offer From Monsanto

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Syngenta Soybean Field

A Syngenta AG sign stands in front of a field of soybeans with genetically modified strains outside of Campo Nueve, Paraguay.

Photographer: Noah Friedman-Rudovsky/Bloomberg

Syngenta AG, the world’s largest maker of agricultural chemicals, rejected a 41.7 billion Swiss-franc ($45 billion) takeover offer from U.S. rival Monsanto Co., saying it undervalued the company and a merger would have significant execution risks.

Monsanto proposed paying 449 Swiss francs a share with 45 percent in cash, Basel-based Syngenta said Friday in a statement, confirming a Bloomberg report that it had received and rejected an offer while leaving the door open for further talks. The Swiss company’s shares surged the most in more than 14 years in Zurich.

A deal would make Monsanto, a U.S. maker of genetically modified seeds and weedkillers, into the largest player in both seeds and crop chemicals. It timed its approach with a lull in Syngenta’s performance amid currency moves and lower crop prices. Syngenta said the offer is too low as it bets that the benefits from grouping products into specific crop units -- from seeds to herbicides -- will soon accelerate, adding to extra sales from a slate of new technologies.

“The long-term outlook of Syngenta is good, so I can understand that they are asking for a higher premium,” Patrick Rafaisz, an analyst at Bank Vontobel AG, said by phone. “These two companies have different corporate cultures. So it will be difficult to merge them without inefficiencies.”

Landmark Deal

Syngenta climbed 19 percent to 396.90 francs in Zurich, the biggest increase since the shares began trading in November 2000, valuing the company at 36.9 billion francs. Monsanto rose 1.4 percent to $120.79 in New York.

The offer values Syngenta at about 17 times its earnings before interest, taxes, depreciation and amortization in the last 12 months. Large agrochemical transactions in the last decade have commanded a median multiple of about 12 times, so a purchase of Syngenta would also rank as one of the industry’s more expensive deals, according to data compiled by Bloomberg.

Combining Syngenta’s leading pesticide products with Monsanto’s expertise in genetically modified seeds “would form an integrated global leader in agriculture,” St. Louis-based Monsanto said in a statement Friday. “The combined company would be uniquely positioned to deliver a comprehensive suite of integrated solutions to farmers around the world and to accelerate technological innovation.”

Monsanto ‘Confident’

The company said it’s “confident” in its ability to obtain regulatory approvals for the deal.

The companies held preliminary talks last year with advisers about a combination, before Syngenta’s management decided against negotiations, people familiar with the matter said at the time. No agreement was reached after concerns were raised about the strategic fit, antitrust issues and the location of headquarters.

If the Monsanto-Syngenta deal goes through, it would be the biggest ever acquisition of a European company by a U.S. rival, according to data compiled by Bloomberg. The deal would’ve only been exceeded by Pfizer Inc.’s attempted purchase of AstraZeneca Plc last year and AbbVie Inc.’s plan to buy drugmaker Shire Plc, both of which were abandoned.

Tempting Syngenta to the negotiating table and agreeing to terms would also make Monsanto a formidable competitor to Bayer AG, BASF SE, Dupont Co. and Dow Chemical Co. Syngenta is the world’s largest maker of crop chemicals whereas Monsanto is the largest maker of seeds and dominates the global market for genetically modified crops like corn and soybeans.

‘Growth Prospects’

Still, Syngenta Chairman Michel Demare said Friday the offer isn’t good enough.

“Monsanto’s proposal does not reflect the outstanding growth prospects of Syngenta’s integrated strategy and the significant future value potential of the company’s crop-focused innovation and market leading positions,” he said. “While Syngenta’s valuation is currently affected by short-term currency and commodity price movements, the business outlook is strong.”

Demare said the offer also underestimates significant execution risks, including regulatory and public scrutiny in many countries.

To address antitrust issues, Monsanto has planned for a deal that would include a sale of portions of the combined business, a person familiar with the matter said last month. The U.S. company last year reached out to potential bidders for those assets, including Bayer, this person said.

Antitrust Issues

The largest business overlaps are the North American and Latin American herbicide markets as well as in seeds in North America, according to Morgan Stanley analysts Paul Walsh and Charles Webb.

Monsanto’s dominance in the seed industry has been the subject of U.S. antitrust probes at the federal and state levels. The U.S. Justice Department’s antitrust division dropped its probe into possible anti-competitive practices in the seed industry in 2012, and a month later at least seven states led by Iowa ended their five-year investigation without taking action.

The company has also been criticized by environmental groups such as Greenpeace that oppose its development of genetically modified crops.

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