Last April, Monsanto Co. offered to buy Syngenta AG for USD 44.3 billion. Syngenta rejected the offer claiming that Monsanto undervalued the company and underestimated the potential antitrust risk. On June 25, four law firms, including Arnold & Porter, Cadwalader, Paul Hastings and Wilmer Hale, “sided” with Monsanto stating the acquisition would pose little antitrust risk.
Normally these types of statements, even from four of the best antitrust practices in the world, aren’t particularly effective. In the States, under the business judgment rule, boards are entirely free to believe their counsel over their adversaries’ counsel. And here, where Monsanto’s counsel has no access to Syngenta’s confidential business information, these opinions could legitimately be ignored as incomplete and pure paid advocacy.
Interestingly, though, Monsanto doesn’t seem to be clumsily stumbling through an antitrust thicket as Dollar General did in its failed bid for Family Dollar.. Monsanto offered to divest up front Syngenta’s full seed and trait business as well as the parties’ herbicide lines. They’ve lined up potential buyers, and have offered a USD 2 billion breakup fee. That fee, while large in absolute terms, is in line with most reverse breaks which hover around 5 percent. It’s a sophisticated offer.
In response, however, Syngenta has stated that their concerns center on Monsanto being the world’s largest seed company and Syngenta the world’s largest crop protection chemical company. This argument has been characterized as essentially a “conglomerate theory.” Conglomerate theories have not been given much credit in the States since the 1970s. And as The Deal observed, no deal has been blocked in the EU on conglomerate concerns since 2001 when GE attempted to take over Honeywell, and Tetra Laval attempted to take over Sidel. Both cases were ultimately overturned by the Court of First Instance. Since, Europe has not blocked a deal on that basis.
Dollar General backed itself into a corner when it refused to offer a hell-or-high-water clause out of the box for Family Dollar. That would have eliminated all antitrust risk for Family Dollar and could very well have forced Family Dollar to allow Dollar General to begin diligence given the timing. By not doing that, Dollar General allowed Family Dollar to develop its own robust internal antitrust analysis upon which it could readily rely even if later Dollar General did in fact off the HOHW. Here it would seem Syngenta has boxed itself in by making the at best somewhat vague and perhaps ineffective claim that “bigger without more can bad under the antitrust laws.”
Unlike Family Dollar, however, there is no bidding war, and so the time pressure is a little less prominent. But Monsanto’s offer will expire, and if the Syngenta board has not fully considered the offer, including pursuing their own antitrust investigation, its board could face scrutiny.
Antitrust is rarely anything but a blunt instrument in fights like these. These arguments almost never carry the day and rarely effect the outcome. But they certainly make for good drama.