Bernstein Doesn't Expect Monsanto To Counter ChemChina Bid

• Syngenta AG (ADR) SYT shares have appreciated 17.47 percent over the past three months, to a high of $80.23 on February 3.
• Bernstein’s Jeremy Redenius has maintained an Outperform rating on Syngenta, while raising the price target from $91.90 to $92.20.
• Syngenta announced on February 3 that ChemChina had made a CHF491 per share offer to acquire the former company. Rednius does not expect Monsanto Company MON to make a counter bid.

ChemChina Offer

Analyst Jeremy Redenius explained that the ChemChina bid included an ordinary dividend of CHF11, which Syngenta’s shareholder will receive in May 2016, and a special dividend of CHF5, which will be given when the deal closes.

“The Board of Directors of Syngenta is unanimously recommending the offer to shareholders,” Rednius reported.

Risks To The Deal

According to the Bernstein report, the biggest risks to the deal closing are the Committee on Foreign Investment in the US (CFIUS) review “and/or politicization,” although both appear manageable for now.

“In theory, CFIUS could block Syngenta from selling GM Seeds in the US on national security grounds. In addition, CFIUS could move to block part of the deal due to the sensitive nature of manufacturing near military bases,” the report said.

Rednius noted that it was very difficult to predict what the outcome would be, given the lack of precedent, while stating that “Syngenta claims to have a "very proactive" relationship with CFIUS and expects little challenge.”

In case there is a problem, the company could divest its U.S. seeds business in order to save the deal. The company could also divest up to $1.54 in annual sales to resolve any CFIUS related issues.

In addition, “sensationalism / nationalism in a US election year could still threaten the deal and create volatility in the share price,” Rednius added.

Counterbid Unlikely

Although ChemChina does not include a break fee, Rednius believes that it would be difficult for Monsanto to give a more attractive offer than ChemChina’s all-cash bid. It had been earlier estimated that Monsanto would only be able to afford 75 percent cash, with the remaining 25 percent in stock in order to match the ChemChina offer.