With billions of dollars at stake, the negotiations over Monsanto’s proposed—and so far rejected—merger with Syngenta have moved on to a very visible stage, with both companies speaking directly to shareholders, farmers, and the public about their perspective on the deal.
“I think the strategic rationale of combining the strongest seeds and traits portfolio with the strongest chemistry platform makes absolutely a lot of sense for farmers,” Monsanto President and COO Brett D. Begemann told AgriTalk’s Mike Adams recently. “When you look at the challenges that agriculture faces, (it) needs innovation to continue to drive the productivity … and I think (this merger) is a really golden opportunity to do this.”
Syngenta, as it has done since April, disagreed. And, on Monday, Syngenta Chairman Michel Demare took to YouTube to explain why the Swiss-based company’s board has again declined Monsanto’s $45 billion offer.
“Monsanto has endorsed our strategy and has clearly demonstrated that it has great value,” Demare said. “The only thing is they are trying to buy it on the cheap and it is the third time they are doing that in four years.”
In a video, Syngenta’s chairman outlined the board’s continuing concerns with the proposal:
- The price: Monsanto’s offer of 449 Swiss francs per share, or roughly $45 billion in U.S. dollars, which Syngenta feels is too low. “We have unanimously concluded that the proposal significantly undervalued Syngenta's prospects,” said Demare, adding later: “The proposal came at a time where the Syngenta share price was affected by two external events: the first one was the weakness of the emerging market currencies, and the second one was the lower commodity prices that we're seeing for the moment.”
- The breakup fee: Should the merger fail to happen, Monsanto has offered to pay Syngenta $2 billion, which Syngenta also feels is too low given the risk involved. However, at 4.4% of the deal’s value, the fee is consistent with what U.S. companies paid in 2014, when breakup fees averaged 4%, according to Bloomberg.
- The regulatory challenges. Regulators in the U.S. and abroad will need to sign off on the deal, which raises antitrust questions and other issues. Monsanto has said it will sell Syngenta’s seed business if the deal happens and that it is confident it can address regulators’ worries, but Syngenta remains publicly skeptical. “The fact is this is a very complex transaction, which is being proposed,” Demare said. “It will take a long, long, time to be solved, and as a result of it, there's a lot of uncertainties and no guarantee of completion. It is clear it would be totally irresponsible for the board to engage on the current proposed terms of the merger.”
Begemann, of course, has a different opinion. “I’m an optimist,” he told Adams. “I believe we’re going to find our way into a conference room somewhere and find some way to get this deal done.”
Monsanto will release third-quarter earnings Wednesday, June 24.