Monsanto announced it is no longer pursuing its proposal to merge the company with Syngenta, ending months of intensive efforts to combine its seed business with Syngenta’s ag chemical portfolio.
In the weeks after the news broke Monsanto was seeking to acquire the Basil, Switzerland-based Syngenta, Monsanto officials talked frequently about how the merger would benefit farmers by broadening the research focus of the two entities. But Syngenta leaders never bought into those arguments.
“While Monsanto continues to believe a combination with Syngenta would have created tremendous value for shareowners of both companies and farmers, Syngenta has communicated that Monsanto’s enhanced proposal did not meet Syngenta’s financial expectations,” Monsanto officials said in a press release Wednesday (Aug. 26).
“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.”
In a statement released after Monsanto’s announcement, Syngenta confirmed it had received a verbal proposal from Monsanto to acquire the company at a price of CHF245 in cash and a fixed ratio of 2.229 Monsanto shares per Syngenta share. At market close on Aug. 25, that equated to a price of CHF 433 per Syngenta share, the company said. (CHF is the abbreviation for Swiss francs, the national currency of Switzerland.)
Syngenta said its board rejected the revised proposal because 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.”
Difference of opinion
For their part, Monsanto officials said the new offer would have translated to a value of CHF 470 per share and given Syngenta shareowners an approximate 30 percent ownership in the new company.
Monsanto also said its latest proposal also increased what it would have paid if the sale had not been approved. “Given the confidence the transaction would close and to provide additional protection from closing risk, the proposal increased the reverse break-up fee to $3 billion,” it said.
“The shareowners of the combined company would have benefited from substantial synergies, significant cash EPS accretion and attractive ROIC, as well as a responsible capital structure.”
Monsanto said it 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 today confirmed its confidence in delivering its five-year plan to more than double fiscal-year 2014 ongoing earnings per share by 2019.
“Monsanto remains the best positioned to drive a comprehensive integrated strategy, with industry-leading assets in breeding, biotechnology, data science, next-generation biologicals, and multiple options to build on its existing crop protection portfolio.”
“We engaged with Monsanto in good faith and highlighted those key issues which required more concrete information in order to continue a dialogue,” said Michel Demaré, chairman of Syngenta, said.
Long-term prospects "attractive'
“We take note of Monsanto’s decision. Our Board is confident that Syngenta’s long-term prospects remain very attractive with a leading portfolio and a promising pipeline of new products and technologies. We are committed to accelerate shareholder value creation.”