SYNN is reporting tomorrow morning @ 7am, Monsanto mentionned few weeks ago they were waiting for SYNN to report before moving
Deal Reporter
Syngenta predicted to enter into talks with Monsanto as shareholders urge change
Heightening pressure from Syngenta’s [VTX: SYNN] shareholders will likely lead to engagement with Monsanto [NYSE:MON], according to two leading Syngenta shareholders and a sector banker.
The first shareholder was convinced Syngenta would look very different a year from now, whether it was via new board members, new management or new owners as part of a merger with Monsanto.
Syngenta’s below-par revenue growth performance points to problems with the management rather than the company’s assets, the shareholder said. The assets either need to find a better home or the board needs to explain how it can do better with them, he said.
Syngenta’s board would come under sufficient pressure for a deal to eventually be struck with Monsanto, the second shareholder believed.
Both shareholders urged Syngenta’s board to engage with Monsanto at the current offer terms. Monsanto had been clear and reasonable in its offering and it was now up to Syngenta’s management to show some flexibility, the second shareholder said.
Monsanto approached Syngenta in April with a cash and shares offer valuing the Swiss company at CHF 449 (EUR 429) per share. Monsanto added a USD 2bn break fee last month, but Syngenta rebuffed the revised offer.
Monsanto Chief Executive Officer Hugh Grant has said any further increase to the unsolicited offer would require some form of due diligence.
Syngenta’s CEO and CFO will be meeting shareholders this week and next throughout Europe, the UK and US after release of its half year results tomorrow (23 July), a Syngenta spokesperson said. Such meetings are typically scheduled at the time of half and full year results, he said.
A sector banker with knowledge of Monsanto’s roadshow said Syngenta’s management was starting to lose the support of its shareholders.
The prospect of the Swiss Takeover Board enforcing a “put up or shut up” deadline on Monsanto’s offer could be higher as both parties increase their efforts to lobby shareholders, the sector banker said.
Syngenta had engaged with its shareholders continually since the beginning of May when Monsanto’s bid was leaked, including two letters, individual meetings with larger investors and a YouTube video, said the Syngenta spokesperson.
For the past three weeks the company had been in a quiet period in which it was not speaking directly to shareholders in the lead up to its half-year results, he said.
The Swiss target’s chairman had met with Monsanto’s chairman while legal representatives from both companies had met three times, the spokesperson said.
Monsanto is thought to want to do a deal swiftly, the second shareholder said. However, without a demonstrable improvement in Syngenta’s performance, time will only increase pressure on the target’s board to take some drastic action, both shareholders said.
Syngenta’s earnings have suffered from low commodity prices and exposure to foreign exchange losses on revenues from emerging markets, the spokesperson said. Monsanto’s offer was “opportunistic” at this point in the cycle, he said.
But the company was continuing its plan to cut costs and increase margins to between 24% and 26% by 2018, he said.
Syngenta’s group sales dropped 14% for the three-month period ending 31 March 2015 compared to the same period in 2014, although the company reported flat growth on a constant exchange rate basis.
Meanwhile Monsanto’s net sales jumped 8% to USD 4.58bn for the three months to the end of May 2015 compared with the same period in 2015. However sales for the nine months to the end of May were down 4% compared to the previous corresponding period, while net income dropped 3% in the same comparison.