Monsanto Co, the world's largest seed company, said on Wednesday that it would still pursue an acquisition of Swiss rival Syngenta AG, which has rebuffed talks about its $45 billion offer, even as it warned of market challenges. Executives at Monsanto, which also reported a higher-than-expected quarterly profit, said they hoped for a friendly deal to acquire Syngenta but were willing to look at other opportunities, such as partnerships.
"If unsuccessful, this isn't something we're going to turn into an epic struggle," Monsanto Chairman Hugh Grant said in a conference call with analysts. Syngenta has said Monsanto's offer is undervalued and that there would be a range of antitrust hurdles to overcome with regulators, but Grant said the offer already provided a substantial premium and that Syngenta was overstating the risks.
Grant said a deal would have to come together in months, not years, and he called on Syngenta's shareholders to convince the company's board to engage with Monsanto. He said a combination of the two companies would result in substantial cost savings and revenue growth opportunities. "There is mounting frustration on both sides of the Atlantic and puzzlement on why they won't sit down," Grant said. "The two companies together are more valuable than the two alone."
Syngenta and Monsanto, which is known for its genetically engineered crops and popular Roundup herbicide, are among the world's largest agricultural seed and chemical providers. Each has roughly $15 billion in annual revenue. Grant said if Monsanto acquires Syngenta, it would divest all of the acquisition's seed and trait lines and competing chemistry products to alleviate any antitrust concerns. "The interest in the sale of the seed assets has been extraordinary, giving us confidence that we can divest the businesses at an attractive price," Grant said.
Monsanto has put its share repurchase program on hold as it pursues its proposal to combine with Syngenta. Monsanto officials forecast break-even results for the current, fourth quarter. They said weakening foreign currencies and low commodity prices would be major challenges beyond this fiscal year. As a result, the company said it was working to reduce its operating spending, potentially by $300 million to $500 million by the end of fiscal 2017.
Monsanto said earnings rose to $1.14 billion, or $2.39 a share, in the third quarter ended on May 31 from $858 million, or $1.62 a share, a year earlier. Analysts on average were expecting $2.07 a share, according to Thomson Reuters I/B/E/S. Sales were up for the company's corn and soybean seeds, and for the unit that includes Roundup, but off for vegetable, cotton and other seeds as well as for genetic traits.
Monsanto benefited from a $300 million commercial licensing and technology deal that expanded Scotts Miracle-Gro Co's marketing rights to Roundup. Monsanto officials also said on Wednesday that they were considering an investment of more than $1 billion in a dicamba herbicide production plant in Louisiana. The company's shares were down 4.5 percent at $107.72 in morning trading.