Syngenta AG, which fended off a $47 billion takeover approach from Monsanto Co., moved to shore up investor support with a plan to buy back more than $2 billion of shares and sell a vegetable-seeds business.
The Swiss maker of pesticides and other agrochemicals will return “significant levels of capital” to shareholders through the initial buyback program that will start in the coming weeks, it said in a statement on Thursday. The shares gained as much as 3.5 percent.
Having just returned from an extensive roadshow across North America and Europe, Chief Executive Officer Mike Mack is accelerating his plans to improve profit margins. Syngenta stock fell 18 percent on Aug. 26 after Monsanto abandoned its takeover attempt, their steepest ever decline, and Mack is faced with a shareholder base that partly backed engaging with the U.S. company.
“The last few months really focused our minds on just how little the appreciation of the inherent worth of seeds assets was,” Chief Financial Officer John Ramsay said by phone. Recent discussions with investors had been “good,” helping to alleviate a “bit of frustration” that had built up, he added.
The plan to overhaul the seeds business is a viable one, Ramsay said, adding that he hopes “shareholders appreciate that and give us the time to exercise on it.” The up-for-sale vegetable seeds unit generated $663 million in sales last year, and may fetch a multiple of three to six times that figure.
If the measures fail to improve profitability and market share, other options including joint ventures and a possible divestment of the whole seeds operation, Ramsay said. While Syngenta isn’t in that position now, any “compelling” offer would have to be looked at, he said.
Syngenta’s seeds business has already generated interest after Monsanto said it would divest those activities in the event of a successful takeover. The move would allow Syngenta to concentrate on its high-margin crop business and could leave the door open to another approach from Monsanto, Andreas Ruhlmann, a market analyst at IG Bank said in a note.
BASF SE was keen to look at assets that could come up for sale, people familiar with the matter said in June. Another potential suitor is Bayer AG, which has doubled the size of its seeds operation to 1 billion euros ($1.1 billion) over the past five years.
For the flower- and vegetable seeds businesses that are already on the block, private equity should interested, said Martin Schreiber, an analyst at Zuercher Kantonalbank. Vegetable seeds alone could fetch more than $2.5 billion, according to Jeremy Redenius of Bernstein.
Syngenta also said it’s confident of reaching a profit- margin target of 24 percent to 26 percent in 2018, reassuring investors that the five-month takeover battle hadn’t hurt the company’s operational performance. Syngenta shares traded 3.7 percent higher at 339 Swiss francs as of 11:20 a.m. in Zurich, valuing the company at 31 billion francs ($32 billion). Monsanto’s last offer was a cash-and-stock bid worth 470 francs.