The agriculture giant upped its bid for the Swiss maker of agriculture chemicals to $47 billion last week, and throughout the courtship, Syngenta refused to participate in negotiations. Analysts predict Monsanto will continue to look for smaller deals.
Agriculture giant Monsanto has abandoned its bid to buy its rival, Syngenta, the St. Louis Post-Dispatch reported.
The move comes more than a week after Monsanto upped its bid to $47 billion—and days after the world’s markets were tossed into upheaval, the Post-Dispatch reported.
“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 company said in statement.
And now that Monsanto has taken its eyes off the Swiss maker of agricultural chemicals, investors will be awaiting another move. After all, the company mentioned earlier this summer that it would consider making a play for Bayer AG’s crop chemical business in the event that it failed on the Syngenta front, the Post-Dispatch reported.
It doesn’t appear, though, that analysts are expecting anything to develop quickly. And when moves do occur, they aren’t likely to be as splashy as the Syngenta effort, said Matt Arnold, an analyst with Des Peres-based Edward Jones. “They’ll continue to scour the marketplace for opportunities,” Arnold said.
Arnold expects the company to look for smaller deals, while relying on its pipeline of new products for the next couple of years. Still, he doesn’t believe Monsanto will abandon the strategy that drove its interest in Syngenta, a leader in crop-protection chemicals, the Post-Dispatch reported.
The company dreams of repeating the growth and financial success it enjoyed after developing its proprietary Roundup herbicide, now sold generically as glyphosate. The product, which is paired with genetically modified seeds, has started to lose effectiveness in the face of resistant weeds, the Post-Dispatch reported.
Monsanto has a new generation of seeds about to hit the market that have been genetically modified to work with the dicamba herbicide. But unlike Roundup, Monsanto doesn’t control the formula for dicamba. “It’s a molecule. It’s not their molecule,” Arnold said.
Still, finding a new target for acquisition got a lot harder during a week that’s witnessed some of the worst market hemorrhaging in years. That’s going to make it difficult for companies to structure large deals relying on stock as currency, said Carol Levenson, a bond analyst for Gimme Credit, the Post-Dispatch reported.
“Monsanto was extremely lucky, actually, to be able to walk away from this one painlessly without having promised to pay a set value for Syngenta,” Levenson said in an email.
Levenson was critical of the Syngenta deal, saying it put the company in too much risk. And she remains worried about what she sees as a financially aggressive position. “Management has shown that it is more than willing to jeopardize the company’s balance sheet and credit quality in pursuit of growth and/or of shareholder enhancement,” she said.
Wednesday’s move marked an end to what has been a sometimes strange courtship involving public spats and a suggestion that Monsanto would move its corporate headquarters to the United Kingdom. There was even talk of a name change, the Post-Dispatch reported.
But through it all, one of the constants has been Syngenta’s steadfast refusal to take part in negotiations. Among other things, Monsanto executives complained repeatedly about Syngenta’s unwillingness to open its books for examination. And after raising concerns about antitrust issues, the company scoffed at Monsanto’s offer of a $2 billion breakup fee in the event that the deal failed to clear regulatory hurdles, the Post-Dispatch reported.
Syngenta also worked publicly to fight off the unsolicited bid. The company published correspondence between the two firms and, at one point, posting a question-and-answer video on YouTube with its chairman Michel Demaré. The latter prompted criticism from Monsanto Chairman Hugh Grant: “We’ve seen the video where they talk to themselves. But we’d love to sit down and talk with them.”
Last week, Monsanto upped its cash-stock offer to 470 Swiss francs, or about $500 per share. It also increased the reverse breakup fee to $3 billion. Syngenta’s board said it rejected Monsanto’s final bid because it “significantly undervalued the company and was fraught with execution risk.” In a press release Wednesday, the Swiss company also said Monsanto’s most recent offer—245 Swiss francs in cash and 2.229 Monsanto shares per Syngenta share—was worth only 433 Swiss francs as of Tuesday’s close, the Post-Dispatch reported.
At market close, Monsanto shares were up more than 8 percent at $97.08 in New York trading. Syngenta shares, however, tumbled 18 percent to 309.90 Swiss francs in Zurich, the Post-Dispatch reported.
Syngenta’s bargaining stance has drawn criticism from its own shareholders, who are asking the board to clarify how it intends to make up billions of dollars of lost shareholder value after Monsanto withdrew its bid, the Post-Dispatch reported.
“What I am looking for now is what Syngenta has to say. Now we need the board and the management to explain their Plan B,” said Pauline McPherson, co-fund manager of Kames Capital’s global equity fund, which holds Syngenta stock. “The ball is firmly in their camp with regards to creating the value they have just refused.”
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