MONSANTO CO. $97 (New York symbol MON, Aggressive Growth Portfolio; Manufacturing & Industry sector; Shares outstanding: 467.8 million; Market cap: $45.4 billion; Price-tosales ratio: 2.7; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.monsanto.com) has dropped its takeover offer for Switzerland-based rival Syngenta AG, the world’s largest maker of pesticides, herbicides and other agricultural chemicals.
A merger would have let Monsanto and Syngenta jointly develop new genetically modified seeds for corn, soybeans and other crops. Syngenta’s expertise would also improve Monsanto’s pesticide products.
In addition, the new firm could cut costs and improve its efficiency by combining distribution networks. Monsanto recently increased its bid by 5%, to $47 billion in cash and shares.
However, Syngenta rejected the new offer as too low. It also refused to negotiate a friendly deal with Monsanto. That’s largely because it felt U.S. and European antitrust regulators would block any merger deal.
We feel Monsanto was right to refuse to submit a higher bid. Big acquisitions like this are much more risky than the smaller purchases that 3M is making (see left).
Monsanto will instead focus on its existing growth plan, which aims to double its annual earnings by 2019.
Monsanto is still a buy.
