Monsanto increases offer for Syngenta to €40 billion

Monsanto has made an increased takeover offer to Syngenta, seeking to draw the Swiss pesticide producer to the negotiating table after its earlier approach was rejected, according to people familiar with the matter.

The recent offer values Syngenta at about 470 Swiss francs per share in cash and stock, compared with the 449 francs the US firm offered earlier this year, the people said, asking not to be identified discussing a private situation.

That would translate to a market capitalization of about 43.7 billion francs (€40 billion), data compiled by Bloomberg show.

The proposal contains a higher proportion of cash than the prior bid, which envisioned a split of 45 per cent cash to 55 per cent Monsanto shares, the people said.

Syngenta’s stock jumped 7.5 per cent to 384.4 francs at 9.06am in Zurich on Tuesday, giving the company a market value equal to $38 billion.

The proposed break fee to be paid by Monsanto should antitrust regulators block the deal has also risen, increasing to $3 billion from the $2 billion previously promised, one of the people said.

Syngenta’s board is scheduled to meet as soon as Tuesday to decide on how to respond to the increased offer, according to a person familiar with the matter.

“We expect Syngenta will reject this new offer as it is still well below what we think is their own “price idea,” of $62 billion or 650 francs a share, Bernstein analyst Jeremy Redenius said in a note.

“However, we think this latest offer and the recent share price weakness means investors will step up the pressure in the coming weeks for Syngenta to negotiate with Monsanto.”

Raising the bid goes against Monsanto’s pledge not to do so unless warranted by a review of Syngenta’s books, said Matt Arnold, a St Louis-based analyst at Edward Jones and Co.

“There’s a little bit of dwindling price discipline here,” Arnold said by phone Monday. “You’d think this is probably the last increase they would do without having more information.”

Monsanto fell 4 per cent to $93.55 in New York on Monday. The St. Louis-based company’s new offer isn’t necessarily final and could change if Syngenta agrees to enter negotiations and open its books for due diligence, the person said.

So far the Basel-based company has refused to negotiate with Monsanto, arguing that it has stronger prospects on its own and that a cost-cutting reorganisation is just starting to bear fruit. Monsanto and Syngenta declined to comment.

A successful deal would turn Monsanto, led by chief executive officer Hugh Grant, into the largest global producer of both seeds and crop chemicals, widening its footprint in Europe significantly.

Producers of agricultural chemicals are facing a slowdown in spending on their products, making consolidation more attractive.

The proposed merger would, however, almost certainly face significant opposition from regulators, politicians, and environmentalists on both sides of the Atlantic wary of allowing Monsanto more influence over agriculture.

Bloomberg