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May 21, 2015 Dow Jones reports: Monsanto Co. emphasized its continued desire to acquire Syngenta AG, saying it is committed to divesting its Swiss rival's entire seed business to win regulatory approval for a merger. Monsanto President Brett Begemann said that combining with Syngenta--the world's largest pesticide seller--would help Monsanto bring more seeds and pesticides to market faster, helping farmers raise more crops. "We're seeing the coming-together of chemistry and biology," he said at an industry conference Wednesday. Syngenta, which earlier this month rejected Monsanto's $45 billion offer, reiterated its position that the bid undervalues its business. Mr. Begemann said Monsanto remains committed to striking a deal with Syngenta, and that the companies continue to talk. He didn't say whether Monsanto would raise its initial bid, but said the company would consider increasing its leverage ratio to seal a transaction. The commitment to divest Syngenta's portfolio of seeds and crop genetics--such as traits developed to give plants attributes like resistance to bugs--is intended to alleviate potential antitrust challenges to combining the world's No. 1 and No. 3 seed companies by sales. Their businesses overlap in seeds for corn, vegetables and other crops. Mr. Begemann said Monsanto's plan to divest Syngenta's seeds business would make the transaction "a really clean deal." The company said in a statement that proceeds from the planned divestitures, which it said would cover all of Syngenta's seeds and traits assets and some of its crop chemicals, would raise cash to "allow the combined company to have a responsible capital structure post-close." Monsanto's global market share in seeds is about 33%, while Syngenta's is about 10%, according to estimates from BMO Capital Markets. Together, Monsanto and Syngenta sell about 40% of U.S. corn seeds, according to Wells Fargo. Analysts have speculated that Monsanto could try to shift its tax home to Syngenta's base in Switzerland if a deal were to occur--a move called an inversion that could add further regulatory scrutiny. Mr. Begemann said tax inversion isn't the main driver of the deal. Syngenta again said that Monsanto's proposal "fundamentally undervalues" Syngenta's prospects and its product pipeline, and that its board had already considered and rejected the assurances Monsanto gave Wednesday. "The regulatory hurdles are more challenging than implied by the announcement," Syngenta spokesman Paul Barrett said. "Syngenta as a stand-alone company has unrivaled scale and reach, with a strong presence in all regions and a crop-based strategy covering eight key crops." Shares of Syngenta climbed 3.7% Wednesday, while Monsanto shares were trading down about 0.7% as of mid afternoon. Mr. Begemann said that absorbing Syngenta's pesticides portfolio would give Monsanto ability to sell products for farmland around the world its products don't currently reach, including portions of Africa and Asia. Monsanto can use its position in seeds to "influence" farmers' decisions on pesticides. "We help farmers make really complex decisions simply, and they follow those recommendations," Mr. Begemann said. Monsanto also projected "substantial synergies" in a combination with Syngenta. About three-quarters of Syngenta's $15 billion in 2014 sales came from pesticides, and the rest mostly from seeds. Monsanto got about a third of its $16 billion sales last year from pesticides, mostly from sales of the weedkiller Roundup. Mr. Begemann also said Monsanto remains optimistic that it can achieve its previously stated goal of doubling earnings per share by 2019, whether or not a deal with Syngenta happens. "We feel very good about our core business," he said. Tweet |
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