By Pam Smith
DTN/The Progressive Farmer Crops Technology Editor
DECATUR, Ill. (DTN) -- Months of conjecture over a possible merger between Monsanto and Syngenta came to an end Wednesday morning. Monsanto officially backed away from its latest proposal to acquire the Switzerland-based company.
News releases from Monsanto indicated company officials continue to believe a combination with Syngenta would be a good thing, but acknowledged that the intended partner continues to find the proposal financially inadequate.
"Without a basis for constructive engagement from Syngenta, Monsanto will continue to focus on its growth opportunities built on its existing core business to deliver the next wave of transformational solutions for agriculture," the news release said.
In interviews with DTN, Monsanto officials indicated they were specifically interested in Syngenta's existing and long-range portfolio of crop protection chemistries.
Syngenta's board confirmed that it received a verbal proposal from Monsanto to acquire the company at an increased cash component price of 245 Swiss francs (CHF) per share and a fixed ratio of 2.229 Monsanto shares per Syngenta share. At market close Aug. 25, this equated to a price of 433 CHF per Syngenta share. Monsanto's information says the offer when made Aug. 18 translated to a value of 470 CHF per share, based on Monsanto's share price and currency exchange rates at the time.
Monsanto also bumped its offer of a reverse break-up fee to $3 billion. The reverse break-up fee would have been payable by Monsanto if it would have been unable to obtain necessary global regulatory approvals.
Communications from Syngenta said the Syngenta board unanimously rejected the revised proposal, saying it significantly undervalued the company and was fraught with execution risk. "Furthermore, recent market volatility highlighted the significant risk for Syngenta shareholders resulting from the structure of this proposal," the release said. Specifically, Syngenta claimed there were certain key issues not addressed by Monsanto to make a proper assessment of the proposed new entity, which would have been 30% owned by Syngenta shareholders.
In particular, Syngenta said Monsanto did not provide sufficient clarity on:
1. Its estimate of total cost and revenue synergies.
2. Its assumptions regarding net sales proceeds of seeds and traits.
3. The nature and extent of regulatory covenants that the company was prepared to offer.
4. The assessment of risks and benefits from a tax inversion to the United Kingdom.
Monsanto said in communication with DTN that it will not pursue the latest proposal. Instead, the company will "continue its focus on opportunities within its existing core business and resume the implementation of its approved share repurchase program as soon as practical." In addition, Monsanto management on Wednesday confirmed its confidence in delivering its five-year plan to more than double fiscal-year 2014 ongoing earnings per share by 2019.
In a press release, National Farmers Union President Roger Johnson said the organization was very pleased by the news that Monsanto has withdrawn its bid to buy Syngenta.
"American agriculture is already far too concentrated, leaving family farmers and ranchers at a great disadvantage in the market place," said Johnson. "This is clearly not only good news for family farmers, but for economically competitive markets as well."
Pamela Smith can be reached at [email protected]
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(AG/ES)
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