* Syngenta declines to comment on report of Monsanto talks
* Shares rise nearly 6 percent, biggest gainers on
(Adds Dow comment)
By Katharina Bart
ZURICH, June 24 Syngenta's shares
jumped on Tuesday after a media report that the Swiss crop
chemical maker had been in talks about a $40 billion takeover by
U.S. rival Monsanto Co to create the world's largest
Monsanto, the world's largest seed company, and Syngenta had
held preliminary talks about combining, partly to allow the U.S.
company to benefit from lower Swiss holding taxes, according to
a report from Bloomberg. The talks were later abandoned, the
A Syngenta spokesman declined to comment on the report.
Monsanto spokesman Lee Quarles said the company did not comment
on "rumors and speculation," and had nothing to say about the
Syngenta shares closed 5.7 percent higher at 345.8 Swiss
francs ($390), the biggest gainer on the pan-European
FTSEurofirst 300 index.
Monsanto shares were down 0.7 percent at $121.26 in
afternoon trade on the New York Stock Exchange.
Analysts are expecting more deals in the sector as larger
players like Monsanto, Bayer and BASF look
to bulk up and broaden their reach in crop protection and seeds.
In April, Chemtura Corp agreed to sell its
agrochemical business to rival Platform Specialty Products Corp
for about $1 billion.
And Denmark's Auriga Industries, which controls
Danish crop-chemical maker Cheminova, said on June 13 that it
was reviewing strategic options.
Companies in Asia are also looking for more expertise in
agrochemicals and seeds, in part due to governments such as
China's wanting to increase domestic production and safeguard
The reported talks with Monsanto put pressure on Syngenta
Chief Executive Officer Mike Mack to bolster the company's
performance and to give money back to shareholders, said several
analysts, including those at Deutsche Bank and MainFirst.
"This steadily increasing M&A story plus the activism theme
we are seeing in U.S. chemicals mean that management teams in
Europe are under more pressure to improve balance sheet
efficiency and/or share prices," said Deutsche Bank analyst
Virginie Boucher-Ferte. She rates the stock a "buy" with a
400-franc target price.
A number of chemical companies in the United States,
including DuPont and Dow Chemical Co, have come
under investor pressure to separate less stable businesses and
increase shareholder returns.
"Dow Chemicals' agro segment might also be available as
management is under pressure to increase shareholder value,"
analysts at German brokerage MainFirst wrote in a note to
Dow AgroSciences spokeswoman Kenda Resler Friend said there
are no such near-term plans to divest the agricultural unit.
"The business is delivering on its significant technology
investments and meeting farmer needs for increased productivity,
and continues to outperform the industry under Dow's ownership,"
DuPont officials were not immediately available for comment.
Deutsche Bank said this shareholder activism was likely to
spread to Europe, raising the stakes for Syngenta and peers such
as Germany's BASF.
Syngenta's shares have lagged those of European rivals,
falling 1.2 percent over the past year compared with a nearly 21
percent rise in the European chemicals sector.
The company is aiming to increase cost cuts to $1 billion a
year by 2018 after disappointing investors with an 11 percent
fall in 2013 profit.
CEO Mack has changed Syngenta's sales model so that a single
account manager sells farmers everything from seeds and
pesticides to fertilisers and support services, and he aims to
boost sales to $25 billion by 2025 from $14.69 billion in 2013.
The tax aspect of Monsanto's potential deal with Syngenta
appears to have been similar to that of U.S. drugmaker Pfizer's
failed attempt to buy rival AstraZeneca for
nearly 70 billion pounds ($119.06 billion) last month.
That deal would have allowed Pfizer to reincorporate in
Britain and pay a significantly lower corporate tax. The U.S.
company would also have been able to use tens of billions of
dollars it has parked overseas, avoiding high U.S. taxes for
repatriating the huge cash pile.
While Switzerland has long competed against its European
neighbours to attract big corporations, it has recently moved
toward more cooperation with the European Union after
disagreements over corporate taxation have strained relations
with the bloc for almost a decade.
Last week, Switzerland said it would abolish some corporate
tax regimes, such as different treatment of domestic and foreign
($1 = 0.5880 British pounds)
($1 = 0.8950 Swiss francs)
(Reporting by Katharina Bart; Additional reporting by Alice
Baghdjian, Rupert Pretterklieber and Carey Gillam; Editing by
Erica Billingham, Lisa Von Ahn and Jonathan Oatis)