As Monsanto intensifies its courtship of Syngenta, emerging details show the Creve Coeur-based agriculture giant is willing to change its name and move its legal headquarters overseas.
The company’s $45 billion offer for its Swiss rival has twice been rejected by the seed and chemical company’s leadership. So Monsanto is changing strategies this week, with plans to take its message directly to Syngenta shareholders in Europe.
Monsanto’s initial approach was rebuffed by Syngenta in May partly on grounds that it failed to address regulatory concerns. On Monday, after its second offer was turned down, a pair of letters offering insight into the negotiations were released by Syngenta. The letters are from Monsanto Chairman Hugh Grant to Syngenta’s leadership.
In a June 6 letter, Grant expressed confidence that its proposed merger would meet regulatory approval. And if that proved not to be true, Monsanto offered Syngenta a $2 billion breakup fee.
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“Such a fee would be among the highest reverse breakup fees that any company has agreed to,” Grant said in the letter.
He also expressed “personal disappointment” with the pace of the negotiations.
And according to an earlier letter, dated April 18, Monsanto’s proposal calls for the two companies to merge under a new parent company, with its legal headquarters in the United Kingdom.
“We would also propose a new name for the combined company to reflect its unique global nature,” Grant, a native of Scotland, wrote.
The name Monsanto has been part of the St. Louis business community since 1901.
No suggestions were offered on what the new name would be. And it’s unclear whether any of Monsanto’s key executives would actually move to the U.K. headquarters.
Such moves, known as tax inversion, have been popular recently for large companies looking to reduce their U.S. tax burden. And given the size of the deal, the firm is likely to be looking for ways to make it work financially.
The U.S. government has been pressuring the nation’s firms to abandon the strategy. Indeed, Monsanto was singled out by Sen. Dick Durbin, D-Ill., who recently sent a letter to the company, urging it not to pursue tax inversion.
“As we’ve previously stated, this is not a tax-driven deal,” Sara Miller, a Monsanto spokeswoman, said in a statement late Monday. “If people view our Syngenta proposal as tax-driven, it misses the vision of what we intend to unlock. This is about creating a new company focused on increased innovation and expanded global reach to support farmers around the world.”
Miller said Syngenta had requested a “neutral site as a corporate base” for the combined company in early negotiations. That offer, she added, was not included in the second, more recent letter, and would be subject to “further negotiations.”
“In any scenario, we remain committed to the U.S. and our hometown of St. Louis,” Miller said. “In fact, part of the strategic rationale we see is that a combined company has the potential to significantly add jobs and economic value to key regions in the U.S., including in St. Louis. We see St. Louis continuing to serve as our global ag innovation hub as it does today, helping deliver on the vision and benefits we expect from the combination.”
Some observers have suggested that Monsanto will have to increase its offer by $5 billion or more if it wants to complete the takeover.
But for now, some of its executives are turning to smaller meetings with Syngenta shareholders this week in London, Zurich and other European cities, according to Reuters.
The U.S. company’s Chief Operating Officer Brett Begemann, for instance, is scheduled to meet investors at a Zurich luxury hotel on Tuesday, according to the news service’s sources.
“The objective is to convince shareholders of Syngenta to pressure the company to negotiate with Monsanto,” one source told Reuters.
The person said Monsanto is hesitant go around management with an official offer to shareholders, because it would have to organize the sale of businesses for antitrust reasons without having control of the company.
Syngenta on Monday was dismissive of Monsanto’s second offer, despite the addition of the $2 billion guarantee.
“Monsanto’s second letter represents the same inadequate price, same inadequate regulatory undertakings to close, same regulatory risks and same issues associated with dual headquarters’ moves,” Syngenta said in a statement. “The only change by Monsanto is to add a wholly inadequate reverse regulatory break fee.”
Editor's note: Story has been corrected to reflect that Syngenta initially released the letters from Monsanto.
