Survey backs Monsanto’s Syngenta bid
Bernstein poll finds investors looking for 5% price rise on $45bn offer
Will the summer standoff continue between US agricultural chemical and seed group Monsanto and its Swiss takeover target Syngenta?
Amid a brief flurry of excitement prompted by prospects of a counter bid, analysts at Bernstein Research also provided a bit of buzz around the $45bn unsolicited offer from the US agri-business group by releasing a poll of its own fund manager clients.
The survey of almost 100 investors, of which two-thirds hold Syngenta shares, showed that more than 90 per cent of the respondents were in favour of negotiation compared to 5 per cent preferring a new strategy.
They also said that they saw an average “acceptable offer price at SFr473” per share, a 5 per cent premium to the current Monsanto offer of SFr449.
The fund managers polled by Bernstein – among whom include at least three top ten investors in the Swiss group – expressed scepticism over Syngenta’s current strategy and targets.
About 75 per cent said the strategy and the company hitting its 2018 earnings before interest, tax, depreciation and amortisation target as “slightly incredible” or “not credible”, with none finding Syngenta’s management “highly credible”.
Jeremy Redenius, analyst at Bernstein behind the survey, said the likely scenarios included shareholders pushing for an extraordinary general meeting, Syngenta seeking a white knight or the Swiss group changing strategy or the management team.
Syngenta has called on Monsanto to increase its offer and also wants the company to raise its existing termination fee proposal of $2bn. The US group, meanwhile, asked the Swiss group to come to the negotiating table.
The investors surveyed by Bernstein seem to back Monsanto’s view, saying the Swiss group’s lack of engagement was “incredible” and “not appropriate.”
But Syngenta says that following its investor roadshow after its half year results recently, it met with over 100 investors in Europe and US and is standing firm.
“It is clear from these conversations that the proposal from Monsanto is wholly unacceptable as it fundamentally undervalues Syngenta’s future prospects and is fraught with significant execution and regulatory risk,” the company says.
One top 20 shareholder says that management is right to hold out for a better offer and not accept the initial bid. He believed that Syngenta’s management would engage as long as Monsanto raised its offer.
After Syngenta’s results presentation last month, Michel Demaré, the group’s chairman told the Financial Times that Syngenta’s top 20 shareholders were divided into two camps – one group that only held the Swiss group’s shares, who were sympathetic to the stand-alone argument, and another group, which owned both Syngenta and Monsanto shares, that wanted the merger to go ahead.
Of the top 20 Syngenta shareholders, only two do not have Monsanto stock. Those who do account for more than a quarter of the Swiss company’s shares, according to Bloomberg data.
As Europe goes into summer holiday mode, Syngenta’s board and management may not have such a relaxing August.