By: Jack Kaskey
Syngenta AG’s investors want management to negotiate with Monsanto Co. about its $45 billion takeover bid and would accept a 5 percent higher offer, according to a Sanford C. Bernstein Ltd. survey.
About 92 percent of respondents in the anonymous survey of almost 100 current and former investors support talks between the companies, London-based Bernstein analysts led by Jeremy Redenius, said in a report Monday. Another 5 percent preferred a new Syngenta strategy or management team, with only 3 percent supporting the status quo.
The survey comes after Syngenta Chief Executive Officer Mike Mack met with shareholders to explain why the Basel, Switzerland-based company rejected Monsanto’s bid in May and refuses to negotiate. Investors in the survey, on average, said an acceptable offer would be 473 Swiss francs ($488.5) a share, about 5 percent more than Monsanto’s 449-franc proposal.
“Syngenta’s investors are overwhelmingly in favor of Syngenta negotiating with Monsanto,” Redenius, who rates Syngenta the equivalent of hold and has no rating on Monsanto, said in the note. “Syngenta management’s lack of engagement with Monsanto was called ‘incredible’ and ‘not appropriate.’”
St. Louis-based Monsanto is not the only company eyeing Syngenta. Reuters reported Germany’s BASF SE has lined up a loan package for a potential counteroffer.
Syngenta closed up 2.6 percent at 408.4 francs in Zurich. Monsanto’s offer is 43 percent more than Syngenta’s closing share price on April 30, just before Bloomberg News first reported the bid.
Syngenta, the world’s largest pesticide maker, said in an e-mailed statement Monday that recent meetings with more than 100 investors reinforce its contention that Monsanto’s unsolicited offer is too low and faces risks from antitrust regulators.
Monsanto, the largest seed company, has said it would divest Syngenta’s seed unit and pay a $2 billion reverse breakup fee if the deal were blocked for competitive reasons.
About 32 percent of respondents in the Bernstein survey said Monsanto’s bid is acceptable, while 25 percent prefer an offer between 450 francs and 474. Another 27 percent said a bid of 475 francs to 499 is acceptable, 10 percent want 500 francs to 524 while 6 percent prefer more than 525 francs.
Monsanto CEO and Chairman Hugh Grant met with about 75 Syngenta investors in Europe last month in a bid to surmount Syngenta’s intransigence. He’s said there’s increasing impatience for talks to begin. Syngenta has said its new and pending products show it can stand alone.
Syngenta investors question management’s ability to execute its strategy, with about 75 percent saying the 2018 earnings targets are “slightly incredible” or “not credible,” according to the Bernstein note.
“Investors are deeply skeptical of Syngenta’s current strategy and targets, primarily due to management issues and an unfavorable agricultural cycle,” Redenius said.
If Syngenta continues solo, investors want an increased focus on costs, selling the seeds unit, boosting shareholder returns and management change, Redenius said.