While I heard talk of a “done deal” due to the newest offer from Monsanto to Syngenta in a group of ag media folks this week, Syngenta wasn’t okay with it according to this announcement from Monsanto this morning. Monsanto says it is no longer pursuing the deal.
While Monsanto Company (NYSE: MON) continues to believe a combination with Syngenta (VTX: SYNN) would have created tremendous value for shareowners of both companies and farmers, Syngenta has communicated that Monsanto’s enhanced proposal did not meet Syngenta’s financial expectations. 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 confirmed it communicated a revised proposal on August 18 to Syngenta to combine the two companies. The enhanced proposal, subject to due diligence and other customary conditions, included a number of elements including the following:
Monsanto’s new proposal increased the cash component of the proposed transaction to CHF 245 per share. The proposal also maintained the same number of shares as in its April proposal, providing Syngenta shareowners with an approximate 30 percent ownership in the new company. Based on Monsanto’s share price and currency exchange rates at the time, the revised proposal translated to a value of CHF 470 per share.
Given the confidence the transaction would close and to provide additional protection from closing risk, the proposal increased the reverse break-up fee to $3 billion. The reverse break-up fee would have been payable by Monsanto if it would have been unable to obtain necessary global regulatory approvals.
Post Update: Click here to see response Syngenta comments on the Monsanto Announcement
The Board of Syngenta confirms that it received a verbal proposal from Monsanto to acquire the company at a price of CHF245 in cash and a fixed ratio of 2.229 Monsanto shares per Syngenta share. At market close on August 25 this equated to a price of CHF 433 per Syngenta share.
After engaging with Monsanto on their latest approach, the Board unanimously rejected their revised proposal. It significantly undervalued the company and was fraught with execution risk. Furthermore, recent market volatility highlighted the significant risk for Syngenta shareholders resulting from the structure of this proposal. In addition, certain key issues were not addressed by Monsanto in sufficient detail to allow Syngenta to make a proper assessment of the proposed new entity, which would have been 30 percent owned by Syngenta shareholders.
In particular, Monsanto did not provide sufficient clarity on the following four issues:
1. Their estimate of total cost and revenue synergies
2. Their assumptions regarding net sales proceeds of seeds and traits
3. The nature and extent of regulatory covenants that they were prepared to offer
4. The assessment of risks and benefits from a tax inversion to the United Kingdom
Michel Demaré, Chairman of Syngenta, said: “We engaged with Monsanto in good faith and highlighted those key issues which required more concrete information in order to continue a dialogue. We take note of Monsanto’s decision. 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.”