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Monsanto’s Grant challenges Syngenta’s resistance to $45bn bid

Hugh Grant, Monsanto CEO, listens to a question during an interview in Chicago, Illinois, U.S., on Friday, Jan. 8, 2019. Photographer: Tim Boyle/Bloomberg News©Bloomberg

Monsanto chief executive Hugh Grant

The head of US agribusiness company Monsanto, who is pursuing an unsolicited $45bn takeover of Syngenta, has challenged the Swiss company to justify its resistance to the offer and questioned its ability to deliver similar returns.

In an interview with the Financial Times during a European tour to win over Syngenta shareholders, Monsanto chairman and chief executive Hugh Grant said: “The way I was trained, when you up your bid and the other side rejects it, they must point to a source of value that you have not already seen yourself.”

The US group made an approach for Syngenta in April, offering cash and stock worth SFr449 per share. The bid is a 43 per cent premium to the Swiss company’s unaffected share price. Monsanto in June revised its bid by adding a $2bn termination fee, which was also rejected.

Michel Demaré, Syngenta chairman, last month said the board unanimously rejected Monsanto’s “unsolicited and unwanted offer” which “significantly” undervalued the Swiss group. He also highlighted concerns over the ability to execute a deal to create what would be the most powerful seed and chemicals business in the world.

Syngenta reiterated on Friday that it would not open its books at the current offer price and highlighted its profit growth since 2000. Its shares rose about 1 per cent on Friday to SFr400.3.

Mr Grant said the board should explain why the 43 per cent premium was insufficient and said any increase in the offer price would have to be based on due diligence. “I am not bidding against myself,” he said.

He expressed doubts about Syngenta’s ability to hit its profit targets as a standalone company. “I think we can improve the performance of that business. They’ve struggled through both ends of the commodities cycle; $6 corn wasn’t too spiffy for them either,” the 57-year-old Scottish executive said.

Mr Grant sought to differentiate Monsanto’s failure to so far bring Syngenta to the negotiating table from US pharma group Pfizer’s failed bid for the UK’s AstraZeneca last year. “One of the fundamental differences here is that you have both communities of shareholders saying that this combination makes a lot of sense. I don’t think that was the case with [Pfizer and AstraZeneca].”

Regarding additional deal protections, Mr Grant said the $2bn break-fee was equivalent to a year of pre-tax income for Syngenta. “When you make the break-fee bigger than that, the danger becomes that you incentivise bad behaviour. The break-fee becomes the deal. It becomes the bright shiny object.”

The Monsanto chief executive warned that the lack of engagement from the Syngenta board could lead the US company to seek alternative acquisition targets in the agricultural chemicals sector.

“[The process] has a shelf life. I think their behaviour at the moment erodes the likelihood of a deal being completed,” he said, adding “If not [Syngenta] we would look for alternatives in that space.”

Mr Grant also reiterated his plans to execute a tax-inversion deal, whereby the merged company would be redomiciled from the US to the UK.

Washington has sought to clamp down on acquisitions that allow US companies to escape taxes by moving overseas. Mr Grant argued that his deal was different.

“I’ve watched some of these deals where a very large American company swallows a very small Irish or Dutch business, where the logic is all about tax. This isn’t that. This creates a whole new business platform,” he said.

Ferrari holding likely to be listed in Netherlands 

A holding created for Ferrari, the luxury Italian car group owned by Italian-US car group FCA is likely to be listed in the Netherlands, Italian language daily Il Sole 24 Ore reported. The report cited FCA CEO Sergio Marchionne who added that for tax purposes Ferrari would be registered in the UK. The item cited Marchionne as noting that this was a similar structure as to that existing for FCA since 2014.

Marchionne estimated the minimum value of Ferrari at EUR 10bn, the report continued. Marchionne reiterated that a 10% stake would be floated.

Il Sole 24 Ore