NEW YORK (The Deal) -- Syngenta (SYT) on Monday rejected a sweetened takeover proposal from Monsanto (MON) and criticized its suitor for not taking U.S. competition concerns raised by the prospective merger of two of the world's largest seeds and crop protection companies seriously enough.
And though antitrust experts predict a merger between the two companies could get approved, the process would probably entail a time-consuming negotiation of a complicated divestiture involving multiple buyers.
Syngenta said that it would need a higher offer and higher termination fee to consider merging with Monsanto.
"If a transaction were to be announced and not consummated, there would be significant harm and value destruction for Syngenta and its shareholders, which requires a careful assessment of all risks and a clear path to closing and is in no way adequately addressed by a paltry reverse regulatory break fee relative to such fees seen in transactions with comparable levels of regulatory risk," Syngenta wrote in a letter to Monsanto, which Syngenta make public.
Syngenta has a point about the breakup fee, which represents just under 5% of the offer price. That is fine for the typical merger, but deals with significant antitrust risk generally carry reverse termination fees in the 7% to 10% range.
Since Monsanto first approached Syngenta last month the target has pointed to antitrust issues as a major impediment to considering a deal.
Syngenta is the world leader in crop protection chemicals and No. 3 in seeds. Monsanto is the world's biggest seedmaker but needs to bulk up in chemicals to remain competitive and has offered to shed Syngenta's U.S. seed business to win regulatory approval.
Monsanto is unlikely to accomplish such a spinoff quickly, if the company's last major seed deal is any guide. The U.S. Department of Justice took nine months to review Monsanto's $1.5 billion acquisition of Delta and Pine Land, then the country's largest seller of cotton seed.
The deal was announced in August 2006 and ultimately approved by the Justice Department with a string of conditions at the end of May 2007. Those conditions included the divestiture of 43 Delta and Pine Land seed lines to Syngenta.