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Syngenta shares jump on $45bn bid from Monsanto

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Shares in Syngenta soared 24% after the group confirmed talk that it had received a $45bn bid from US rival Monsanto – although saying it had rejected the offer as "not in the best interests" of the group.

Syngenta, the world's biggest agrichemicals group, said that Monsanto, the top-ranked seeds group and owner of the Roundup herbicide brand, had made an offer for the Swiss-based group of SFr449 per share, a 35% premium to last night's closing price.

The statement follows a revival in longstanding rumours of a deal between the two groups, which last year held talks over a merger which would have involved moving Monsanto's tax location to Switzerland to exploit tax breaks, although US authorities have since clamped down on such perks.

Syngenta shares remained notably short of the Monsanto offer in morning deals, after the Basel-based group rejected the bid.

However, the shares staged a fresh rally, reaching SFr411.80 in afternoon deals, after Monsanto unveiled its own statement restating its interest in a purchase of Syngenta, which it has proposed to pay for in a mixture of 55% cash and 45% shares.

"Monsanto believes a combination would deliver significant value to shareholders of both companies," the group said.

"The combination is expected to result in substantial synergies as the company delivers more integrated solutions to customers"

'Significant execution risks'

Syngenta said that its board had "unanimously determined to reject Monsanto's proposal as it is not in the best interests of Syngenta, its shareholders and its stakeholders", the statement said.

Monsanto's offer "fundamentally undervalues Syngenta's prospects and underestimates the significant execution risks, including regulatory and public scrutiny at multiple levels in many countries", Syngenta said.

With Syngenta and Monsanto holding substantial shares of seed markets in areas including North America, some analysts have raised concerns that a deal could require substantial business disposals to satisfy anti-trust requirements.

'Business outlook is strong'

Michel Demare, the Syngenta chairman, acknowledged that the performance of Syngenta shares, which hit SFr415.00 in March 2013, had been "affected by short-term currency and commodity price movements".

The strength of the dollar, which cuts the value of foreign takings for groups reporting in the dollar, and the dent to farm spending from low grain prices has hit profits at many ag groups.

However, Monsanto's offer "does not reflect the outstanding growth prospects of Syngenta's integrated strategy", which has seen the group tie agrichemicals and seed operations closer together, in an effort to boost sales of both.

"The business outlook is strong," Mr Demare said, highlighting that Syngenta's integrated strategy "has been particularly successful" in emerging markets which have grown to account for more than 50% of group sales.

Tax inversion

In fact, Monsanto's relatively small presence in agrichemicals is seen as a major reason behind its bid approach, and the US group on Friday that a combined company with Syngenta "would be uniquely positioned to deliver a comprehensive suite of integrated solutions to farmers".

Monsanto added that combining its pre-eminence in seeds, including genetically modified varieties, with Syngenta's "strengths and leadership" would create an "integrated global leader in agriculture with comprehensive and complementary product portfolios".

It would also create a group with "enhanced abilities" for researching and developing fresh agricultural products.

On deal risk, Monsanto said it had " devoted significant time and resources" to analysing a tie-up and was "confident in its ability to obtain all necessary regulatory approvals".

Monsanto shares stood 2.7% higher at $122.29 in afternoon deals in New York, while Syngenta stock closed up 19.3% at $396.90, adding more than $6bn to the group's stockmarket value.

By Agrimoney.com

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