Monsanto Co. said its proposed acquisition of Syngenta AG would include the sale of all of the Swiss company’s assets for conventional and genetically modified seeds in an effort to overcome regulatory concerns.
The deal would also trigger the sale of some overlapping chemical operations, Monsanto said in a statement Wednesday ahead of an investor presentation by Chief Operating Officer Brett Begemann.
Earlier this month, Syngenta rejected a 41.7 billion Swiss-franc ($44.5 billion) offer from its U.S. rival, saying it undervalued the company and posed execution risks. Buying Syngenta would make St. Louis-based Monsanto, already the world’s largest supplier of seeds, the biggest player in agricultural chemicals as well.
“We already thought that the odds of the deal going through were relatively high, but this new information increases the likelihood,” London-based analysts at Deutsche Bank AG led by Virginie Boucher-Ferte said Wednesday in a note.
Syngenta was aware of the planned divestitures when it rejected the offer, said Paul Barrett, a spokesman for the Basel, Switzerland-based company.
“The regulatory hurdles are more challenging than implied by the announcement,” Barrett said in an e-mailed statement.
Monsanto fell 1 percent to $118.77 at the close in New York. Syngenta climbed 3.7 percent to 423.2 Swiss francs in Zurich.
Benefits of combining the two companies include “substantial” cost savings, enhanced research and development, and a more diverse range of products and services for farmers, Monsanto said.
Syngenta’s seeds business generated revenue last year of 2.89 billion Swiss francs or 21 percent of total sales. Selling the seeds unit plus some herbicide businesses could generate $8 billion, Deutsche Bank said in the note.
“The proceeds from the planned divestitures would create a source of cash to allow the combined company to have a responsible capital structure post-close,” Monsanto said.
Scotts Miracle-Gro Co. said separately Wednesday that a new agreement gives it the right to make the first offer for Monsanto’s consumer Roundup business, were the company to sell it. Scotts already licenses Roundup, the world’s most popular herbicide, for the consumer market.
Monsanto is more likely to sell Syngenta’s seeds business to BASF SE or Bayer AG, both based in Germany, because they are relatively small players in that market and so would become less formidable competitors than U.S. rivals DuPont Co. and Dow Chemical Co., Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said in a note Wednesday.
By increasing its sales of pesticides, the deal would make Monsanto’s earnings more dependent on the price of commodity crops such as corn, rather than on sales of new genetically modified seeds, Shaw said. Still, the combination would increase earnings and “give Monsanto the products and the reach to make it the 800-pound gorilla” in agriculture, Shaw said.