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Monsanto-Syngenta duelling will draw blood this time

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This time, the Monsanto-Syngenta merger story isn't going to go back in the box.

The idea of a tie-up between US-based Monsanto, the world's biggest seeds group with a bit of an agrichemicals division attached, and Switzerland's Syngenta, for which sprays are the bigger market, is nothing new.

A year ago, the two groups were widely said to have held preliminary talks only for Syngenta to have, reportedly, walked away.

And that wasn't the first time a potential tie-up had been talked of.

No going back

But Friday's announcement of a $45bn bid by Monsanto for Syngenta puts the merger story on a whole new plain.

Crucially, the approach has been confirmed, by both companies. That means the idea of a tie-up cannot be easily swept under the carpet, as last time, when Monsanto adroitly switched the market's focus by unveiling a $10bn share buyback scheme.

While both sides walked away little-scarred from last year's encounter last time, that will not be the case this time, now their contest will play out in the public eye.

The last mega-merger proposal revealed in the ag sector, between US nitrogen fertilizer group CF Industries and European rival Yara International, ended with the chief executive of the latter losing his job.

Company bosses who lose takeover attempts aren't always given the boot. But the least Monsanto chairman and chief executive Hugh Grant can expect from a failed Syngenta bid is a huge loss of credibility of himself, and his company, as an acquirer.

Big value

That said, this doesn't seem to be the outcome that the market desires.

Another reason that the latest Monsanto bid won't go back in the cupboard is that shareholders seem to want it.

It is usual for shares in target companies to soar, as Syngenta's have, when a takeover is unveiled.

But it is not a given that stock in the acquirer company gains too, as Monsanto's did on Friday, if by a more modest 2.6% in late deals on a strong day for shares.

The combined valuations of both Monsanto and Syngenta have risen by more than $9bn since the deal was announced.

Mack's choice

Investors see a stack of value in this merger.

That puts the pressure on Syngenta boss Mike Mack, if he is to persist in rejecting Monsanto's overtures.

He needs to show investors that they are mistaken – perhaps, through showing that deal value would be lost through heavy sell-offs to meet anti-trust requirements, or perhaps through demonstrating better that Syngenta is better as a standalone.

Given the tricky agricultural markets, he may struggle on the last score, at least - especially if Monsanto were to sweetens its bid.

By Mike Verdin

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