As US agrochemicals behemoth Monsanto appears to be pulling out all stops in its quest to take over European leader Syngenta, reports say a dark horse or white knight – depending on the observer’s perspective – may be galloping toward Switzerland to enter the fray.
Quoting confidential sources, the news agency Reuters has reported that Germany’s BASF is speaking to investment bankers about the possibility of making an offer for Syngenta, though it has as yet made no decision.
Analysts had suggested earlier that Monsanto might strike a deal with conventional chemical crop protection producers such as BASF and Bayer to make a joint bid for Syngenta and jointly strip the assets, as bids from any of the rivals might run afoul of antitrust issues.
With sales of €5.4 billion in 2014, BASF’s crop chemicals division is believed to account for around 11% of the conventional global crop chemicals market, ranking it third globally behind Syngenta and Bayer. The German group is said to have its eye on Syngenta’s seeds business, which globally leading seeds player Monsanto could not acquire without restrictions.
Up to now, Syngenta has thumbed its nose at two bids by Monsanto. The second letter received from Monsanto on June 6, the company said, “essentially repeats” its US suitor’s bid dated April 18, offering “the same inadequate price, same inadequate regulatory undertakings to close, same regulatory risks and same issues associated with dual headquarters' moves.”
The only change, the Basel-based company said, was the offer of a “wholly inadequate reverse regulatory break fee" of $2 billion. “If a transaction were to be announced and not consummated, there would be significant harm and value destruction for Syngenta and its shareholders.”
Outside lawyers representing Monsanto and Syngenta have met on three occasions, the Swiss player acknowledged.
These meetings, it said, have reinforced Syngenta’s assessment of the regulatory risk. Rather than attempting to seriously address these concerns, it said “Monsanto continues to gloss over these fundamental transaction risks.”
Moreover, the Swiss player said it and its legal advisors do not think the regulatory issues are resolved as simply as by a pre-agreed and pre-announced package of horizontal divestitures, which is Monsanto’s proposed approach. It pointed to “notable examples” of proposed transactions blocked by regulators due to “conglomerate concerns” and other non-horizontal issues.”
Beating its own drum, Syngenta said that as a standalone company with a broad crop protection, seeds and traits portfolio and four years’ experience of integration it is “already delivering integrated technology on a global basis.” With the help of recent product innovations and its Accelerating Operational Leverage program, it said it is targeting a 24-26% EBITDA margin in 2018.
Undaunted by the Swiss protests, reports say Monsanto has been holding meetings with Syngenta shareholders across Europe. Some investors are seen as Monsanto’s apparent plans to sell Syngenta’s seed business as a risk. They say this would unravel its declared strategy of managing seeds and crop protection products under one roof.