Monsanto Co. abandoned its latest effort to acquire Syngenta, the world’s top maker of pesticides, after a sweetened bid valuing the Swiss company at $46.2 billion was rejected.
Syngenta’s shares fell 13.5 percent on Wednesday, while Monsanto’s stock rose 8.6 percent – its biggest gain in six years.
Monsanto raised its cash-and-stock offer on Aug. 18 to 470 Swiss francs a share from 449 francs, based on stock prices at the time, the St. Louis-based company said Wednesday in a statement. The sweetened bid was worth 433 francs based on Tuesday’s closing price and was unanimously rejected by Syngenta’s board, the Basel, Switzerland-based company said in a separate statement.
Monsanto Chairman and Chief Executive Officer Hugh Grant was making his third approach since 2011 to create the largest global producer of seeds and crop chemicals. Syngenta, which has said Monsanto undervalued the company’s prospects and underestimated antitrust hurdles, now risks incurring the wrath of some shareholders courted by Monsanto.
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“Although we had no issue with Monsanto acquiring parts of Syngenta, we believed the regulatory issues would have been difficult to overcome,” Keith Carpenter, a Toronto-based analyst at Canaccord Genuity Corp., said in a note.
Syngenta employs 750 people in Greensboro and 450 in Research Triangle Park, where it has a research and development center for both its seeds and crop protection businesses.
The latest bid increased the cash component to 245 francs. It also raised the reverse breakup fee to $3 billion from $2 billion, to be paid if regulators rejected the combination, Monsanto said.
The offer undervalued the company and “was fraught with execution risk,” Syngenta said in its statement. Recent declines in equity markets “highlighted the significant risk to shareholders” in the stock component of the transaction, Syngenta said. Monsanto investors would have held 70 percent of the new company with the rest held by Syngenta stockholders.
Syngenta refused to negotiate since Monsanto in April renewed its approach. Syngenta CEO Mike Mack has said his company can stand alone with a product pipeline that stretches to the end of the decade.
“Pressure on management will be high,” said John Klein, a London-based analyst at Berenberg Bank. “Mack will need to deliver on his strategy, and deliver very quickly.”
Monsanto’s Grant tried to pressure management into talks by meeting with Syngenta shareholders in Europe and then raising his offer this month.
“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,” Monsanto said in its statement.
Monsanto said it has “confidence” in its goal of more than doubling earnings per share in five years from 2014. It also plans to resume share repurchases “as soon as practical.”
Syngenta said Monsanto didn’t address key issues, including estimated savings from the combination, assumptions for how much asset sales would generate, specifics on regulatory covenants and an assessment of risks and benefits from the planned relocation of the merged company’s tax base to Britain.
“We engaged with Monsanto in good faith and highlighted those key issues which required more concrete information in order to continue a dialogue,” Syngenta Chairman Michel Demare said in the statement. “Our board is confident that Syngenta’s long-term prospects remain very attractive.”