Monsanto Company said Wednesday that while it continues to believe a combination with Syngenta would have created tremendous value for shareowners of both companies and farmers, its most recent proposal of 470 francs ($47 billion) per share in cash and stock and a $3 billion reverse break-up fee did not meet Syngenta’s financial expectations.
“Without a basis for constructive engagement from Syngenta, Monsanto will continue to focus on its growth opportunities built on its existing core business to deliver the next wave of transformational solutions for agriculture,” the company said in a release.
Monsanto confirmed it communicated a revised proposal on Aug. 18 to Syngenta to combine the two companies. The enhanced proposal, subject to due diligence and other customary conditions, included a number of elements.
Monsanto’s new proposal increased the cash component of the proposed transaction to CHF 245 per share. The proposal also maintained the same number of shares as in its April proposal, providing Syngenta shareowners with an approximate 30% ownership in the new company. Based on Monsanto’s share price and currency exchange rates at the time, the revised proposal translated to a value of CHF 470 per share.
Given the confidence the transaction would close and to provide additional protection from closing risk, the proposal increased the reverse break-up fee by $1 billion to $3 billion. The reverse break-up fee would have been payable by Monsanto if it would have been unable to obtain necessary global regulatory approvals.
The shareowners of the combined company would have benefited from substantial synergies, significant cash EPS accretion and attractive ROIC, as well as a responsible capital structure, Monsanto said.
Moving forward, Monsanto said it will continue focusing on opportunities within its existing core business and resume the implementation of its approved share repurchase program as soon as practical. Additionally, Monsanto management confirmed its confidence in delivering its five-year plan to more than double fiscal-year 2014 ongoing earnings per share by 2019.
“Monsanto remains the best positioned to drive a comprehensive integrated strategy, with industry-leading assets in breeding, biotechnology, data science, next-generation biologicals, and multiple options to build on its existing crop protection portfolio,” the company said.
Syngenta said its Board “unanimously rejected” Monsanto’s revised proposal because it “significantly undervalued the company and was fraught with execution risk.”
A statement from Syngenta said certain key issues were not addressed by Monsanto including Monsanto’s estimate of total cost and revenue synergies; assumptions regarding net sales proceeds of seeds and traits; nature and extent of regulatory covenants that Monsanto said it was prepared to offer; and the assessment of risks and benefits from a tax inversion into the United Kingdom.
“We engaged with Monsanto in good faith and highlighted those key issues which required more concreted information in order to continue a dialogue,” said Michel Demare, chairman of Syngenta. He said Syngenta takes note of Monsanto’s decision to no longer pursue Syngenta and added Syngenta’s Board is confident in attractive long-term prospects the company can pursue to create accelerated shareholder value.