Syngenta AG, the world’s largest maker of agrochemicals, rejected a 41.7 billion Swiss-franc ($45 billion) takeover offer from Monsanto Co. because it undervalued the company and a merger would have “significant” execution risks.
Monsanto proposed an offer of 449 Swiss francs a share, with the cash part of the bid equal to 45 percent, the Basel-based company said Friday in a statement. That’s 35 percent higher than yesterday’s close. Syngenta was up 17 percent at 389 francs as of 9:09 a.m. in Zurich, valuing the company at 36.3 billion francs. Bloomberg earlier reported the approach.
The U.S. maker of genetically-modified seeds and Round-Up weedkiller timed its approach with a lull in Syngenta’s performance amid currency moves and lower crop prices. Chief Executive Officer Mike Mack is betting that the benefits from grouping products into specific crops — from seeds to herbicides — will soon accelerate, adding to extra sales from a slate of new technologies to be released into the market.
“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,” Chairman Michel Demare said. “While Syngenta’s valuation is currently affected by short-term currency and commodity price movements, the business outlook is strong.”
Tempting Syngenta to the negotiating table and agreeing terms would result in a deal that ranks the biggest acquisition in the chemical industry and make Monsanto a formidable competitor to Bayer AG, BASF SE and Dow Chemical Co. Syngenta is the world’s largest maker of crop chemicals whereas St. Louis-based Monsanto is the largest maker of seeds and dominates the global market for genetically modified crops like corn and soybeans.
“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, said by phone. “These two companies have different corporate cultures. So it will be difficult to merge them without inefficiencies.”
In terms of potential antitrust issues, the largest business overlaps are the North American and Latin American herbicide markets as well as seeds in North America, according to Morgan Stanley analysts Paul Walsh and Charles Webb.
“The offer fundamentally undervalues Syngenta’s prospects and underestimates the significant execution risks, including regulatory and public scrutiny at multiple levels in many countries,” Demare said.
The biggest deal targeting a chemical producer to date was the combination of Hoechst and Rhone-Poulenc SA, a more than $20 billion deal that created drugmaker Aventis SA in 1999. The largest transaction among agricultural-chemical makers was the merger between Russian potash producers OAO Uralkali and OAO Silvinit in 2011, valued at less than $10 billion.