Syngenta’s Refusal to Negotiate With Monsanto Irks Shareholders Link : http://on.wsj.com/1I37ftx
Some investors complain of inadequate communications from the Swiss company
Syngenta AG plans a series of meetings with investors as it contends with frustration from some shareholders over its rejection of a roughly $45 billion takeover effort by rival agribusiness giant Monsanto Co.
Executives for Syngenta, including Chief Executive Michael Mack and Chief Financial Officer John Ramsay, plan to meet with investors in Europe and the U.S. after the Basel, Switzerland-based company reports its first-half financial results, which are scheduled for Thursday, people familiar with the matter said.
Some Syngenta shareholders are voicing discontent over the pesticide maker’s steadfast refusal over the past three months to enter negotiations with Monsanto, and over Syngenta’s communications with its own shareholders on the matter.
“Most of the investor community cannot understand why they are not sitting down, or sitting together at a table and starting to talk to one another,” said Martin Lehmann, a partner and fund manager with 3V Asset Management AG, a Zurich-based firm that owns Syngenta shares.
Monsanto, the world’s largest seller of seeds, proposed in late April a deal that would refashion the global agriculture industry by creating a world leader in both seed and pesticide sales. The St. Louis-based company says the new entity would be better equipped to formulate new products and bring them quickly to farm fields. Its offering price of 449 Swiss francs ($467) a share was a 43% premium to Syngenta’s share price before Monsanto’s approach became public, and remains higher than Friday’s closing price of 407 francs.
Advertisement
Syngenta’s board has refused to open formal talks. Company officials have raised antitrust concerns and argued that Monsanto was trying to scoop Syngenta up at a cut-rate price. Agricultural suppliers are struggling with weak crop prices that have pinched profits for farmers and the companies that sell them seeds, sprays and tractors.
Shares of Syngenta had declined about 10% in the year before Monsanto’s approach became public, while Monsanto’s stock had increased 3%, versus an 11% increase in the S&P 500 index.
Monsanto has tried to pressure Syngenta by taking its case to the Swiss company’s shareholders, dispatching top executives including Chairman and Chief Executive Hugh Grant to meet Syngenta investors in Europe and the U.K. over the past month. To canvass shareholders, Monsanto has retained proxy specialists at Georgeson Inc. in the U.S. and Vontobel Holding AG in Zurich.
Syngenta has been constrained from some communications with shareholders in part because it has been in a “quiet period” ahead of its earnings report on Thursday. The company typically speaks with and meets investors and analysts after releasing its financial results.
While Syngenta’s management hasn’t held face-to-face meetings with shareholders since Monsanto’s approach became public, the company in late June posted a video online in which its chairman, Michel Demaré, detailed Syngenta’s reservations toward Monsanto’s proposal and the virtues of a stand-alone strategy. Mr. Demaré also discussed the matter directly with some shareholders, according to a person close to the discussions.
Some investors complain that Syngenta’s communications have been inadequate. A top five shareholder of Syngenta expressed frustration in private talks with the management that it didn’t discuss Monsanto’s approach with investors first before refusing it. The investor, which didn’t want to be named, also urged management to ask shareholders about their considerations first should Monsanto float a new offer.
Another Syngenta shareholder, London-based Henderson Global Investors, told Syngenta in an email this month that Monsanto’s takeover proposal is “credible and deserves serious consideration,” according to a person familiar with the message. The email was first reported by Reuters.
“Whilst we have not yet taken a firm position to support [Monsanto], the lack of any opportunity to engage with Syngenta is likely to be an important factor in our decision making,” Henderson officials wrote. “We were therefore very surprised to learn that the company is currently limiting shareholder engagement to a very small group of shareholders, and relying on a YouTube video to communicate with the rest of the investor base.”
A spokeswoman for Henderson said “we believe the long-term Monsanto strategy is credible for Syngenta stakeholders.”
A Syngenta spokesman declined to comment on the email.
Syngenta’s financial results this week also could affect investors’ attitudes. Analysts polled by Thomson Reuters expect the company to report a 4% decline in first-half profit to $1.3 billion, on an 8% slide in revenue to $7.8 billion. Monsanto last month said its latest quarterly profit soared by nearly a third from a year earlier to $1.1 billion, thanks partly to a new sales partnership centered on its Roundup weedkiller.
Jeremy Redenius, analyst with Sanford C. Bernstein & Co., said Monsanto’s approach has increased pressure on Syngenta’s management after several years of disappointing earnings growth.
“They need to deliver a good result and say the right things to instill some confidence among their investors that they’re running the business well and looking out for the best interests of shareholders,” Mr. Redenius said.