Midwestern Financial Group I Fiduciary Advisors I Wealth Management


Update on Monsanto's Bid for Syngenta

UPDATED - Wednesday (5:00 PM)

A few weeks ago we commented on Monsanto’s desire to acquire Syngenta, the Swiss agribusiness giant. Fast-forward to today and it’s clear that Monsanto now really, really wants Syngenta.

What’s new is Syngenta’s growing openness towards the transaction. Today, Syngenta’s Chairman Michel Demare said, “A serious proposal to buy Syngenta has to be made at full and fair value, has to recognize for shareholders the inherent combination benefits and has to provide a high degree of certainty that the transaction will be closed."

How can Monsanto provide certainty that the transaction will be closed? Well, they cannot really predict with certainty how regulators will react to the merger of the world’s largest seed company with the world’s largest agrochemical company. It has never been done. Thus, it is likely Monsanto will increase their reverse breakup fee. 

Monsanto recently proposed a $2 billion reverse breakup fee they would pay to Syngenta if regulators stopped the deal after 18 months. An increase in the breakup fee may be what Syngenta’s board is looking for in addition to a bid increase.

Syngenta's Chairman Demare is clear that he and others believe Monsanto is undervaluing their business at $45 billion. In order for them to sell this acquisition to shareholders, management will need a higher offering price and a larger breakup fee given the certainty of regulatory concerns.

To that end, Syngenta has turned a corner in their consideration. A company spokesman said in a statement, "Syngenta will be seeking feedback from our largest shareholders in the days ahead.”

Monsanto reported their most recent earnings Wednesday and management remained steadfast on a Syngenta acquisition. In a statement, Monsanto Chairman Hugh Grant said acquiring Syngenta is "an exciting logical next step" that would provide "the opportunity to accelerate innovation and support a more diverse group of farmers around the world.”

UPDATE: Citigroup's equity research team released analysis on the possible deal and believes Dow Chemical could acquire Syngenta's seed business which would need to be spun-off. They do not believe DuPont (Pioneer) would be interested because DuPont's current U.S. market share, with their Pioneer seed business, would not be allowed from an antitrust perspective.

Below is Syngenta's Chairman discussing Monsanto's proposal. 

Midwestern Financial