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Monsanto still eager to merge with Syngenta but signals it has other options

June 24, 2015
Chemical Value Chain
Monsanto, announcing its third-quarter results today, reconfirmed that it is eager to merge with Syngenta. However, Monsanto signaled earlier that it has other options. Monsanto executives reiterated the company’s vision and strategic rationale for the Syngenta proposal—to create a new company that would provide a comprehensive portfolio of integrated solutions to help farmers around the world address current and future agricultural, environmental, and sustainability challenges. “Our proposal to combine with Syngenta is an exciting logical next step for our business, offering the opportunity to accelerate innovation and support a more diverse group of farmers around the world,” said Hugh Grant, chairman of Monsanto.
 
Syngenta, which has turned down two earlier takeover proposals from Monsanto, said yesterday that future takeover proposals from Monsanto need to be at a fair price and provide a high degree of certainty that any deal would clear antitrust hurdles. But Monsanto, in what has been interpreted by analysts as a signal to Syngenta that it has other possibilities, told Bloomberg that it is exploring other options should Syngenta continue to reject the deal. Brett Begemann, Monsanto COO, told Bloomberg that the company would approach Bayer about acquiring Bayer CropScience if it cannot buy Syngenta. Bayer chairman Marijn Dekkers, however, has said many times that Bayer CropScience would remain part of the group’s life-sciences portfolio.  
 
Syngenta’s chairman Michel Demaré confirmed yesterday Syngenta’s opposition to Monsanto’s current proposal. Monsanto offered to buy Syngenta for $45 billion. Demaré said that Syngenta would consider future proposals but only if they fulfilled certain requirements. “A serious proposal to buy Syngenta has to be made at full and fair value. It has to recognize for shareholders the inherent combination benefits. And it has to provide a high degree of certainty that the transaction will be closed, including compensation in case the deal fails, be it for antitrust reasons or any other reasons,” Demaré said.
 
Syngenta in May turned down Monsanto’s initial takeover approach on the grounds of it being too low and not addressing antitrust concerns. Monsanto has since offered to pay Syngenta $2 billion if the takeover fails on antitrust grounds. Demaré called the second proposal “a copy-paste of the first proposal” and said that the sheer size of Monsanto’s proposed disposal package would be highly disruptive for Syngenta. “How can we on one hand continue to market our integrated offers to our farmers whilst at the same time start to dismantle this integrated strategy across the world? This would have huge commercial and organizational consequences for Syngenta…and we really don’t believe that a break fee of $2 billion is going to even start to mitigate these impacts.”
 
Demaré is also skeptical about the possibility of a UK domicile for a merged company for tax-inversion purposes. Syngenta and its legacy companies have been based in Basel for 250 years, he says. “We have a great relationship with the local government and our shareholders today enjoy 100% of the benefits coming from the very competitive tax rates that we enjoy in Basel. So I have a hard time to see how a UK setup could be more competitive and especially for shareholders.”
 
By Natasha Alperowicz
 

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