Syngenta earnings report fuels more debate over Monsanto buy-out offer

By Sarah Gonzalez

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, July 23, 2015 - Syngenta's 2015 half-year earnings report released today showed lower earnings and sales from a year ago, but analysts say the results are better than expected in a tough environment of low crop prices.

Earnings per share fell 6 percent. The company recorded sales of $7.6 billion, down 10 percent from a year earlier but up 3 percent when adjusted for currency swings.

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“Our performance in the first half of the year demonstrates our ability to improve profitability even in a difficult market environment,” Syngenta CEO Michael Mack said in a news release. “The progress made by our new products and our expanded pipeline underpin our confidence in delivering sustained sales growth accompanied by market share gains.”

However, Monsanto used the report to advance its bid to buy the Swiss agrochemical company. St. Louis-based Monsanto has offered $45 billion offer to buy Syngenta, but the company refused to enter into negotiations, citing concerns about antitrust regulations and calling Monsanto's offer “woefully inadequate.”

Jon Leibowitz, an attorney for Syngenta and former chairman of the Federal Trade Commission (FTC), said Monsanto's latest offer - which Syngenta rejected in June - “doesn't address the possibility of additional divestitures…or the possibility of behavioral remedies which might be required by the antitrust agencies.”

He noted that the FTC, Department of Justice and European regulators, are “very concerned about consolidations” and have prevented mergers like Comcast with Time-Warner, and T Mobile and AT&T.

“I think that the Syngenta board was pretty clear that the deal was inadequate from a variety of perspectives, including protecting the Syngenta shareholders,” Leibowitz said. “I think the perspective of any objective antitrust observer would be that this type of deal has very real complications. They involve every jurisdiction from the U.S., to EU, to China, to Latin America.”

Monsanto's offer includes a $2 billion “break-up fee” to cover the costs in case regulators reject a merger. In an interview with Agri-Pulse, Chief Technology Officer Robb Fraley said this is the largest break-up fee ever offered to a European company.

“We've made a very attractive offer,” Fraley said, adding that the deal would provide a 43 percent premium for Syngenta shareholders.

Monsanto's business is primarily centered on seeds and traits, while Syngenta is heavily focused on crop protection chemicals, although both companies are active in each sector. In the event of a deal, Monsanto would sell Syngenta's seed and trait assets to avoid overlap, which Fraley said “puts to rest any regulatory concerns.”

Furthermore, Fraley said Monsanto is open to increasing its bid, but that is “dependent on the ability to understand more information about Syngenta than is publicly available...and the only way to do that is through a negotiation.”

Fraley said his conversations with investors in the U.S. and Europe indicate that Syngenta will hear a similar message from its shareholders in coming weeks.

“There's a lot of enthusiasm,” said Fraley, who said shareholders have been talking about a new, merged company that would have “an incredible vision… a lot of innovation that will drive new products to benefit farmers around the world.”

Leibowitz, the Syngenta attorney, warned that ultimately, antitrust agencies will listen to why proponents of a merger believe it's a good idea, “but their job will be to focus on reducing prices and increasing competition on behalf of the public and they take that very seriously.”

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