Monsanto Drops Bid for Syngenta

Monsanto, the giant US corporation that produces pesticides and genetically engineered pesticide-resistant seeds, announced Wednesday in New York that it would discontinue its attempt to take over its Swiss rival Syngenta. Earlier Monsanto efforts were rejected in June, as was this latest offer.

And for a second top-30 investor, Syngenta’s management had to explain why they were so reluctant to open their books, given the security of a bumper $3 billion break fee that equated to a year’s earnings before interest and tax.

Monsanto said it had no choice but to pull the plug on the proposed deal after Syngenta refused to entertain repeated and improved offers.

In responding to Monsanto’s announcement, Syngenta Chairman Michel Demaré said that his company engaged with Monsanto “in good faith”, but that Monsanto fell short on key issues “which required more concrete information in order to continue the dialogue”.

Syngenta shares in Switzerland closed more than 18 percent lower on the news that the deal was off the cards.

Monsanto, the world’s largest seed company, said it still believes in the value of a combination, but will focus on building its core business and meeting long-term growth objectives. Monsanto also revised its break-up fee from $2 billion to $3 billion in case the transaction does not materialize.

The surprise disclosure on Wednesday capped four months of aggressive pursuit by St. Louis-based Monsanto, which Syngenta had consistently rebuffed even as some of its shareholders pressured the Swiss company to negotiate.

However, the company’s board unanimously chose to reject the offer, which “fundamentally undervalues Syngenta’s prospects and underestimates the significant execution risks”.

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

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.

Monsanto said it could handle antitrust hurdles, and said it would sell off Syngenta’s seeds and genetic traits businesses. Syngenta’s management is under pressure to start talking.

Shares of Monsanto have jumped 7.7% to $96.28 at 2:51 p.m. today, while Syngenta has tumbled 14% to $67.33.

Monsanto shares surged more than 8% after the news.