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Syngenta AG: $45B Bid From Monsanto Company Undervalues Firm

Swiss agricultural conglomerate Syngenta announced on Friday that it had rejected a $45 billion unsolicited takeover offer from U.S. rival Monsanto, arguing that the proposed deal significantly undervalued the firm.

Syngenta

Basel-based Syngenta noted in its statement released Friday that Monsanto had bid 449 Swiss francs ($486.20) per share, with 45% in cash. Of note, the  price means the deal was valued at 41.7 billion francs given the number of Syngenta shares outstanding.

The statement noted that Syngenta’s board of directors had unanimously rejected the proposal because it wasn’t in the best interests of the firm or shareholders.

More on rejected Monsanto – Syngenta deal

Syngenta also argued that that Monsanto’s bid underestimated the risks involved in executing the deal as well as the intense regulatory scrutiny it would receive. Some industry analysts have discussed potential potential tax benefits for Monsanto by moving its tax domicile to Europe, a so-called tax inversion deal. Of note, the Obama administration took steps to limit the benfits from tax inversions a few months ago.

Analysts also highlight that a Syngenta and Monsanto combination would result in an agricultural behemoth with total annual revenues of more than $31 billion. The two firms do compete in a few areas, but more broadly Syngenta is the dominant player in developing chemical products to protect crops and improve yield, while Monsanto is a leader in genetically modified crops.

Monsanto’s $45 billion bid represents a 35% premium to Syngenta 332.70 franc price late Thursday. Shares of the European agricultural titan soared over 15% to as high as 383 francs in early trading on the news.

Syngenta’s profits have slipped over the last couple of years, and the firm announced cost-cutting efforts 2014 to save up to $1 billion annually by 2018

Rising dollar could result in sweetened bid

According to analyst Andreas Ruhlmann of IG Bank, if the U.S. dollar continues to move up, this might permit Monsanto to sweeten its offer here in a few months.

“Should the (U.S. dollar) resume its uptrend and get back above parity—what might be the case by the end of the year, as we believe—we should not be surprised to hear about an even more attractive offer for Syngenta shares by Monsanto,” Ruhlmann commented in a note to investors.