Peter Newcomb | Bloomberg
Creve Coeur-based Monsanto could save $500 million annually in taxes if it were to re-incorporate in Syngenta's home nation Switzerland, a possibility that recently provoked pleas from U.S. Sen. d**k Durbin of Illinois for Monsanto to stay in the U.S.
While investors and Syngenta AG officials await the next move by Monsanto Co., whose $45 billion purchase offer recently was rebuffed by the Swiss agribusiness, analysts say Monsanto could reap billions in savings if it acquired its rival.
Brett Wong and Tyler Etten, analysts with investment bank and financial firm Piper Jaffray, said in a note Monday that even at a price of around $50 billion -- which could be enough to succeed, major Syngenta investors told Reuters -- the acquisition of Syngenta could be "accretive" to Monsanto.
Specifically, Wong and Etten estimate that Monsanto could reduce costs by $1.5 billion to $2 billion for a combined company. Additionally, Monsanto could save $500 million annually in taxes if it were to re-incorporate in Switzerland, a possibility that recently provoked pleas from U.S. Sen. d**k Durbin of Illinois for Monsanto to stay in the country.
Of those corporate cost savings, Monsanto could find about $1 billion through Syngenta's "Accelerating Operational Leverage" initiative, a companywide cost-cutting program that aims to save Syngenta $1 billion by 2018. Wong and Etten said Monsanto could also save between $500 million and $1 billion through administrative, sales and general cost cuts.
Finally, the analysts expect that Monsanto would divest Syngenta's corn business -- out of antitrust concerns and because Monsanto has "a better quality germoplasm business" that could save the combined company $100 million to $200 million. Potential buyers for Syngenta's corn business include ag rivals Dow, Bayer and BASF.
In time, Wong and Etten said, there is an opportunity to create two businesses out of the acquisition: one focused on crop chemicals, one on seeds. In such a scenario, Monsanto could hand off its own glyphosate business, which the analysts said would be "viewed positively by investors."
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