Article

by Carey Gillam

U.S. agribusiness leader Monsanto Co. (MON.N) on Wednesday abandoned pursuit of Swiss rival Syngenta AG SYNN.VX, which had rejected a recently sweetened $47 billion offer.

Syngenta shares fell more than 18 percent on the news, while Monsanto shares jumped more than 7 percent.

The Swiss agrichemicals group said its board unanimously rejected the offer, which it said "significantly undervalued the company." Monsanto, the world's largest seed company, said it still believes in the value of a combination. It will focus on building its core business and meeting long-term growth objectives and also said it was resuming a share buyback program.

Some farmers had feared that a combined company would have too much power to raise prices for seeds and herbicides. Both companies had acknowledged that a deal would face antitrust scrutiny in several countries.

Syngenta Chairman Michel Demaré said the company had engaged with Monsanto in good faith and would prosper without the deal.

"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,” he said in a statement.

Still, some Syngenta shareholders expressed disappointment over the scuttled deal and questioned Syngenta's ability to improve its financial fortunes.

"They have to justify to their shareholders that they can create the value that they have just turned down," said Pauline McPherson, co-fund manager of Kames Capital's global equity fund, which holds Syngenta stock.

Billionaire hedge fund manager John Paulson, whose Paulson & Co. had taken a stake in Syngenta, had no comment.

Monsanto confirmed that it made a revised offer to Syngenta on Aug. 18, raising a previous offer to 470 Swiss francs per share, valuing the company at roughly $47 billion. It also confirmed it raised a reverse break-up fee to $3 billion.

Syngenta said the verbal proposal set a price of 245 Swiss francs in cash and a fixed ratio of 2.229 Monsanto shares per Syngenta share. At market close on Aug. 25 this equated to a price of 433 Swiss francs per Syngenta share.

Monsanto has said that it wanted to acquire Syngenta primarily to boost its agrichemicals portfolio, which now relies mainly on glyphosate-based herbicides branded as Roundup.

Monsanto is known for its development of genetically altered crops, while Syngenta is the world's largest agrichemical company and has a broad portfolio of insecticides, herbicides, fungicides and seed treatments used by farmers around the world.

The takeover effort became a public spectacle of sorts over recent months as leaders at both companies argued the merits the proposed deal through the media, videos and other online forums.

Monsanto's management also tried to force Syngenta's management team to come to the bargaining table by wooing support from Syngenta shareholders, and met with several farm groups to solicit support for the deal.

But Syngenta's management team refused repeatedly to open their books and begin negotiations. Syngenta officials insisted that Monsanto was undervaluing the company and that an attempted combination would raise serious antitrust issues in many countries, possibly provoking lengthy and costly delays.

Many U.S. farmers had feared a deal would limit their choices and spell higher prices for seeds and chemicals. The National Farmers Union (NFU) said it was relieved that Monsanto dropped its bid.

“This is clearly not only good news for family farmers, but for economically competitive markets as well," said NFU President Roger Johnson.

Syngenta also said Monsanto had been unclear on key issues including estimated revenue syngergies.

Monsanto said it could handle antitrust hurdles, and said it would sell off Syngenta's seeds and genetic traits businesses. The deal would have brought "substantial synergies" translating to higher profits for a combined company, Monsanto said.

Monsanto officials "are pretty fed up. There is a complete frustration about the whole pursuit and that is why this is the end of the Syngenta talks," said Piper Jaffray analyst Brett Wong.

Wong said Monsanto would probably stake out another acquisition target soon to boost its crop chemicals holdings.

Syngenta slid to 309.50 Swiss francs, while Monsanto shares jumped to $96.77.

Monsanto officials also said they still plan to deliver on a five-year plan to more than double fiscal-year 2014 ongoing earnings per share by 2019.

 

(Additional reporting by Oliver Hirt in Zurich, Svea Herbst in Boston, Sinead Cruise in London and Mike Stone in New York; Editing by Chizu Nomiyama and David Gregorio)