Monsanto Co’s rejected US$45 billion bid for Syngenta AG forces the suitor to ask itself the same hard question as disappointed shareholders of the target company: Is the Swiss maker of agrochemicals really worth more?
Before the offer was unveiled on Friday, investors saw a 2.9 percent drop in Syngenta’s share price over the past 12 months as the Swiss company struggled to keep pace with peers.
As shareholders consider the ramifications of Monsanto’s cash-and-share bid, buoyed by a 17 percent jump in Syngenta’s stock price on Friday, Monsanto must decide the merits of a higher offer to become the world’s biggest player in both seeds and crop chemicals.
Monsanto’s unsolicited approach heaps pressure on Syngenta chief executive Mike Mack to show that he can go it alone, and that the changes he instigated will pay the best dividends.
So far, he has struggled to convince some investors that grouping Syngenta’s products into specific crop lines would bring in extra sales, and that enough effort has been put into getting new technologies to the market. He has pulled back on the integrated product strategy in the US to defend market share in seeds.
“The fact is that Syngenta management is under enormous pressure,” Baader Bank AG analyst Markus Mayer said. “The market does not believe in the goals Syngenta has set [for] itself.”
Still, Syngenta rebuffed the proposal, saying it does not reflect “outstanding growth prospects” and “future value potential.”
Besides, Monsanto is underestimating the “significant execution risks, including regulatory and public scrutiny at multiple levels in many countries,” Syngenta chairman Michel Demare said.
Monsanto would have to raise its 449 Swiss francs (US$482) per share offer to more than SF500 a share to win over Syngenta’s board, according to a note by Sophie Jourdier and other Liberum analysts.
Makor Group analyst Alex Olvera said in a separate note that Syngenta probably would not accept an offer below SF473 per share.
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