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 Sources had told Reuters overnight that the two agricultural
companies were working with investment banks on a takeover deal that
would create an industry behemoth with combined sales of more than
$31 billion.
But on Friday Syngenta said its board had unanimously rejected a
45-percent cash offer by Monsanto that would value Syngenta at 449
Swiss francs ($486.35) per share.
"The offer fundamentally undervalues Syngenta's prospects and
underestimates the significant execution risks, including regulatory
and public scrutiny at multiple levels in many countries," Syngenta
said in a statement.
Syngenta shares rose 17 percent to 390 Swiss francs by 0715 GMT on
Friday after the bid approach was confirmed.
Swiss company Syngenta had been working with Goldman Sachs to assess
the merits of a sale to the world's largest seeds company Monsanto,
which is being advised by Morgan Stanley, the sources had earlier
told Reuters.
 Rumors of talks between the two companies gained pace at the end of
April, sending shares in Syngenta to a record high of 351 Swiss
francs on May 4.
Monsanto, which initially approached Syngenta last year, has long
been interested in its Swiss rival and the potential to base itself
in Switzerland and benefit from lower taxes, one of the sources told
Reuters.
Following attempts by the U.S. Treasury to clamp down on such moves,
known as tax inversion, Monsanto may have to buy Syngenta in a cash
rather than stock transaction and would be unable to redomicile in
Switzerland, an industry source said.
RIVAL BIDDERS?
Monsanto foresees strong benefits from a takeover of Syngenta, which
makes heavy research and development (R&D) investments in crop
technology to increase the average productivity of crops such as
corn, soybeans, sugar cane and cereals.
Monsanto, meanwhile, is focused on conventional and biotech seeds
and last year raised its R&D spending to $1.7 billion from $1.5
billion in 2013.
"There is a clear strategic logic to a deal," one of the industry
sources said. "Syngenta is the only available target in crop
protection. It's no wonder Monsanto continues to circle the
company."
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A deal would come as prospects for genetically modified (GM) crops
are improving in the European Union after a change in its
legislation unlocked a stalled approval process. Monsanto owns the
only GM product approved for cultivation in the EU, a modified
maize.
Despite the two companies' cultural affinity, a merger may be
challenged by antitrust regulators, primarily in North America,
where the two groups are already seen as market leaders in the seeds
industry.
German chemicals company BASF and U.S. petrochemicals group Dow
Chemical could be among possible bidders for all or parts of
Syngenta, one of the sources said.
He mentioned Chinese state-owned firm, China National Chemical Corp
(ChemChina), as another possible buyer with strong appetite to bulk
up its European presence, though Syngenta may be reluctant to cede
control to an Asian rival.
Spokesmen at BASF and Dow Chemical declined to comment, while
representatives of ChemChina were not immediately available for
comment.
Syngenta, which was formed in 2000 by the merger of Novartis
Agribusiness and Zeneca Agrochemicals, also competes with Bayer
CropScience and DuPont Pioneer.
(Additional reporting by Arno Schuetze in Frankfurt, Greg
Roumeliotis and Mike Stone in New York, Sybille de La Hamaide in
Paris and Avik Das in Bengaluru; Editing by Gopakumar Warrier and
Keith Weir)
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