Rumor Of Massive Monsanto-Syngenta Deal Gets Agriculture Sector Moving
According to a June 23 Bloomberg report, Monsanto Company (NYSE: MON) had recently explored a possible deal to acquire Syngenta (NYSE: SYT), a Swiss-based rival. The suggested purpose of this deal was to allow Monsanto to move its tax location outside of the U.S.
This is not the first time a U.S. based company has sought to acquire a foreign company in attempts to avoid corporate taxes.
As listed in the Bloomberg report, companies such as Pfizer (NYSE: PFE), AbbVie (NYSE: ABBV) and AstraZeneca (NYSE: AZN) have also recently explored the possibility of a European acquisition. Additionally, Medtronic (NYSE: MDT) has recently announced that it will drop its U.S. address as part of a plan to save as much as $14 billion through tax inversion.
According to Bloomberg's source, the deal valued Syngenta at over $40 billion
“Investors would love it, it would create by far the biggest agricultural technology company in the world," said Bank Vontobel AG analyst Patrick Rafaisz.
The report explained management at Syngenta has decided not to pursue negotiations at this time and cited Lee Quarles, a spokesman for Monsanto, as saying, "We are not in discussions on this particular matter."
Bloomberg cited people familiar with the matter as saying the now nonexistent deal carried concerns ranging from antitrust laws to relocation issues, as well as worries that politicians would simply remove the tax inversion loophole, thus eliminating the benefit.
Rafaisz added, "Antitrust would be a problem, mainly in the seeds business where the two companies would become extremely dominant in certain areas like U.S. corn."
Following the release of the Bloomberg report, shares of Syngenta jumped over six percent from ~$73 to ~$77 and have held near $77.80. In contrast, shares of Monsanto spiked about two percent from ~$121 to ~$123 and have since returned down near Friday's close of $122.08.
In addition to these two companies, the agriculture ETF Market Vector Agribusiness (NYSE: MOO) moved up about $0.40.
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