The desire to avoid U.S. corporate taxes has now spread to agricultural giants -- as a dead deal shows.
Monsanto Co., the world’s largest seed company worth $64 billion, recently explored a takeover of $34 billion Swiss rival Syngenta AG in a transaction that would have allowed the U.S. firm to move its tax location to Switzerland.
The deal, which is now defunct according to people familiar with the matter, is another sign of how U.S. firms in many sectors are trying to avoid corporate taxes by moving their headquarters overseas. U.S. drugmaker Pfizer Inc. pursued U.K.- based AstraZeneca Plc, offering as much as $117 billion before abandoning the deal, while North Chicago, Illinois-based AbbVie Inc. is chasing Dublin-based Shire Plc for $46.5 billion.
Monsanto and Syngenta held preliminary talks with advisers in the past few months about a combination before Syngenta’s management decided against negotiations, said the people, who asked not to be identified because the talks were private. Company officials also spoke informally with each other about a potential deal, two of the people said.
There were concerns about the strategic fit, antitrust issues and relocating the company to Switzerland for tax reasons, they said. The talks, which valued Syngenta at more than $40 billion, fizzled out in late May, one of the people said. An additional concern was that U.S. politicians would close the inversion loophole, thereby removing that benefit, another person said.
"The economics of the deal appear attractive at first" as it would boost earnings and lower taxes and costs, Sanford C. Bernstein analysts led by Jeremy Redenius said in a note to investors today. "However, the deal faces insurmountable strategic, antitrust, and public opinion issues in our view."
Syngenta shares surged as much as 7 percent in Swiss trading today and were up 6 percent as of 2:27 p.m. local time. Before today, the stock had underperformed peers in the past two years and declined about 8 percent in 2014. Monsanto yesterday was almost unchanged in New York, for an advance this year of 4.8 percent.
Combining the two companies would have created the largest player in the world for both seeds and crop chemicals and a formidable competitor to German rivals Bayer AG and BASF SE and Dow Chemical Co. in the U.S. Syngenta is the world’s largest maker of crop chemicals and strongest in Europe, whereas Monsanto is the largest maker of seeds and dominates the U.S. market for genetically modified crops like corn and soybeans.
"Investors would love it, it would create by far the biggest agricultural technology company in the world," said Patrick Rafaisz, an analyst at Bank Vontobel AG, adding that it would be a surprise if they pulled off such a transaction.